On 15 November 2016, part of the 4th EU Anti-Money Laundering Directive (the “Directive”) was transposed into Irish law by The European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2016 (the “Regulations”).

The Regulations and the Directive place additional obligations on Irish corporate entities and shareholders that should not be ignored. Ita O’Sullivan from our Corporate team answers the key questions you need to ask.

UPDATE ON TIMING

The remainder of the Directive is due to be transposed into domestic law by member states by 26 June 2017, including a requirement to establish a central register of beneficial ownership of companies and other corporate entities (the “Central Register”). However, on 1 June 2017, the Companies Registration Office (“CRO”) announced that while legal and technical work to launch this register is progressing:

  • The Central Register is now expected to be launched in Q4 2017 – more definitive information will be provided in early September; and
  • There will then be an extended timeframe (minimum 3 months) for companies to make their beneficial ownership filings for inclusion in the Central Register.

The Directive – what is it for?

The stated aim of the Directive is to prevent the use of the EU’s financial system for the purposes of money laundering and terrorist financing. This includes measures to ensure that persons with significant economic interests in an entity are readily identifiable for the purposes of customer due diligence by banks, credit institutions, specified professional advisers and providers of gambling services. Similar requirements have been in force in the UK since 2016.

One of the measures the Directive introduces is a requirement for EU Member States to establish a central register of beneficial ownership of corporate and other legal entities (including trusts). The Directive must be transposed into Irish law by Q4 and the Regulations introduced last November were the first step to pave the way for full transposition.

What are the current obligations on Irish corporate entities?

Since 15 November 2016 all Irish companies and other legal entities incorporated in Ireland (other than listed plcs that already report under the Transparency regime or entities which are subject to equivalent international standards) are obliged to take all reasonable steps to hold “adequate, accurate and current information” on their ultimate beneficial owner(s) –i.e. the real people behind the business. That information must be kept in an internal register – referred to as a “beneficial ownership register”.

Who is a “beneficial owner”?

A “beneficial owner” is any natural person(s) who ultimately owns or controls the corporate entity, through direct or indirect ownership of a sufficient percentage of the shares or voting rights or ownership interests in that entity.

A shareholding of 25% plus one share or an ownership interest of more than 25% by a person is an indication of direct ownership. However “control” may also exist through other means – e.g. via a shareholders’ agreement or power to appoint senior management.

“Indirect ownership” – a shareholding of 25% plus one share or an ownership of interest of more than 25% held by a corporate entity which is under the control of a natural person(s) (or by multiple corporate entities which are under the control of the same natural person(s)) is an indication of indirect ownership.

What information must the “beneficial ownership register” contain?

The information required to be entered in the register is:

  • Name of the beneficial owner
  • DOB
  • Nationality
  • Residential address
  • A statement of the nature and extent of the interest held.

The Register must also include the date on which each person was entered into the register and (if applicable) the date on which person(s) ceased to be beneficial owner(s).

When do I update the Register?

The register must be updated whenever there has been a change in beneficial ownership. Beneficial owners are also under an independent obligation to notify the corporate entity of his/her status and any changes to it – whether or not a notice has been served on them by the corporate entity.

What if the company doesn’t know who its beneficial owner(s) are?

Each company/corporate entity is under an obligation to serve a notice requesting the necessary information on: (i) any natural person whom it has reasonable cause to believe to be a beneficial owner; and/or (ii) any other person (whether a natural person or not) whom it has reasonable cause to believe has knowledge of the identity of a beneficial owner. The recipient of the notice has 1 month to comply and provide the information requested.

If the beneficial owner(s) cannot be identified or there is doubt as to whether the person(s) identified is actually the beneficial owner, the corporate entity must enter its “senior managing officials” (directors and CEO) as the beneficial owners i.e. they are treated as the beneficial owners for the purposes of the Regulations/Directive. However, the entity must have exhausted all possible means to identify the relevant individual and have records of the actions it took to identify the beneficial owner(s).

What’s happening next?

The next step under the Directive will be a requirement for these Irish companies and other corporate entities to file their internal registers with a central beneficial ownership register. This ‘Central Register’ for Irish companies will be administered by the Companies Registration Office. It is expected that it will be in place from Q4 2017.

  • The CRO has confirmed that there will be a minimum three-month grace period in which companies can file the required information without being in breach of the statutory duty to file.
  • Filing will be done online and there will be no paper forms or filing fees.
  • The information to be filed with the Central Register on each beneficial owner should include information contained on the company’s internal beneficial ownership register.
  • It should also include details of the person making the submission for entry in the Central Register, i.e. name, postal address, e-mail address and telephone number.

Who will be able to see/inspect this Central Register?

Under the 4th AML Directive the general public will not have access to the Central Register, but it will be accessible by: a) competent authorities – e.g. the Central Bank of Ireland; b) entities required to carry out customer due diligence (e.g. banks, accountants, tax advisors, and solicitors); and c) others with a legitimate interest in enforcing anti-money laundering legislation.

Note: A 5th Anti-Money Laundering Directive (“5AMLD”) is currently being finalised at European level. It proposes to amend the 4th AML Directive to enable the public to access certain information held in the Central Register. We will keep you updated on developments as this progresses.

What are the penalties for non-compliance?

Failure by a corporate entity to comply with its obligations regarding the beneficial ownership register or failure by the recipient of a notice to comply is a criminal offence and can result in a fine of up to €5,000 on summary conviction.

In addition, failure by a beneficial owner to notify his/her interest in an Irish company or other corporate entity (regardless of whether or not he/she has received a notice from that company) is a criminal offence and can result in a fine of up to €5,000 on summary conviction

Take Action Now!

Companies: It is important that companies ensure that they are compliant with their internal obligations in advance of Q4 2017 so that they can easily comply with their obligations to file with the Central Register. If not already in place, the first step is to create an internal beneficial ownership register without delay. From experience, we know that this can be a time-consuming task, in particular where the corporate entity has a number of corporate shareholders, which may make it difficult to collate all the information in advance of the upcoming deadline.

The Regulations do not prescribe the form the beneficial ownership register must take so, in practical terms, your register of members maintained under the Companies Acts is a good starting point. However, you may find that you do not have all the information required – e.g. you will need to request Dates of Birth for your shareholders. You will also need to ensure that the information you have on your shareholders is up-to-date – e.g. residential addresses.

Shareholders: If you are a shareholder in any Irish company or other corporate entity and “control” that company/entity, you are subject to an independent obligation under the Regulations. You must notify that company/corporate entity of your status as beneficial owner unless you know your details have already been included or you have received a notice from the corporate entity requesting the relevant information and you have responded accordingly.