Until recently, anti-money laundering (AML) obligations were considered to be important only for certain categories of service providers and intermediaries working in specific sectors, such as energy, raw materials, banking and finance, etc.
In the near future, however, all legal entities will be required to identify and disclose their controlling shareholders and ultimate beneficial owners (UBOs).
The AML Act of 18 September 2017 repealed the AML Act of 11 January 1993 and finally transposed into national law the fourth Anti-Money Laundering Directive (2015/849) (the "Directive"). The full text of the AML Act, which entered into effect on 16 October 2017, is available here.
While under the old rules, there was no obligation for most entities to gather information about shareholders and ultimate beneficial owners, the new AML Act clearly requires all qualifying entities to gather relevant information and transmit it to a central register of ultimate beneficial owners (the "UBO Register").
Definition of a UBO
The new disclosure obligation applies to a wide range of entities: qualifying companies, trusts, domestic and international non-profit associations and foundations, and legal constructions of a similar nature. The AML Act provides a detailed definition of a UBO for each type of entity, available here.
- For companies: an individual who directly or indirectly holds a sufficient percentage of the ownership or economic interests (i.e. voting rights and/or capital). As a general rule, a sufficient percentage is more than 25%. Please note that the AML Act also expressly applies to individuals who exercise control through "other means" (i.e. in consolidated groups). If no individuals are identified through the application of this rule, the scope is extended to "high-level management".
- For trusts: the settlor, trustee, protector, beneficiary or any other person with direct or indirect ownership or exercising ultimate control.
- For non-profit associations and foundations: the members of the board of directors, persons with the power to represent the association or foundation, persons to whom daily management is entrusted and those in whose interest the entity is set up.
- For legal constructions of a similar nature: all persons with functions similar to those described above for a trust and, in brief, all those who will directly or indirectly benefit from a given transaction.
The disclosure obligation
The AML Act provides for a twofold disclosure obligation:
- First, the entity is expected to gather sufficient, accurate and up-to-date information about its UBOs, including details about their economic interests; this information should include, for each UBO, at least the full name, date of birth, nationality, address and the nature and size of the economic interest held.
- Second, the directors must submit this information within one month's time by electronic means to the UBO Register.
In practice, this means that it is important to establish a procedure to ensure that the required information is gathered and transmitted to the competent authorities. It is also necessary to notify all modifications to the information on file in a timely manner and make sure that it is kept up-to-date.
Access to the UBO Register
According to the Directive, Belgium should ensure that the UBO Register is accessible to:
- competent authorities and financial intelligence processing units, without restriction;
- "obliged entities", within the framework of customer due diligence in accordance with Chapter II of the Directive;
- any person or organisation that can demonstrate a legitimate interest, but in this case only the name, month and year of birth, nationality and country of residence of the UBO as well as the nature and extent of the beneficial interest held.
The AML Act entrusts the executive branch with the task of defining practicalities and implementing measures for the new disclosure obligation. The UBO Register will be set up and operated by the federal tax authorities. The new rules should have been adopted by 26 June 2017, but Belgium failed to meet this deadline.
Purpose of the UBO Register
During the parliamentary debate on the AML Act, it was made clear that the tax authorities cannot use the UBO Register to assess taxes. In other words, the UBO Register may only be used to fight money laundering and terrorist financing. Despite this fact, the draft Omnibus Act 25 December 2017 contained a provision allowing the tax authorities to access the UBO Register in order to verify that taxes have been correctly assessed. This wording was later removed but reinserted in a new bill introduced on 31 January 2018.
Penalties for noncompliance
If a company does not comply with the new rules, the AML Act provides for severe sanctions and director's liability. Financial penalties ranging from EUR 50 to EUR 5,000 can be imposed on directors who fail to provide the required information on time.
On 15 December 2017, the European Council and Parliament reached an agreement on a proposal to introduce enhanced corporate transparency rules (the fifth Anti-Money Laundering Directive). The proposal contains extended provisions on the implementation and design of UBO registers within the EU and states that
- company UBO registers should be publicly accessible and national registers better interconnected;
- UBO registers for trusts and similar legal arrangements need only be accessible to those with a legitimate interest.
The proposal is expected to enter into effect in 2019 or 2020 (depending on the type of UBO).
In view of the foregoing, it is important to start gathering all relevant information before the AML Act enters into force.