Money laundering and terrorism financing practices are a global phenomenon that affects all sectors of society. The high rate of criminality in this area has led to a higher awareness of the effects of such activities, raising the pressure on governments and legal entities to increase transparency and liability. A common European policy was therefore created to establish more effective anti – money laundering rules.
In this context, Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 was adopted, the forth and most comprehensive European Anti – Money Laundering Directive (AMLD 4), having as implementation date June 26, 2017.
Directive (EU) 2015/849, the tool with the broadest spectrum in Europe at moment, has as primary objective to remove the ambiguities in previous legislation and to ensure consistency across EU Member States in their approaches of regulating a TOOL to prevent and fight money laundering and terrorism financing.
Although there are several amendments imposed – strengthened obligation for risk assessment, facilitating cooperation and exchange of information between financial institutions in different Member States, extending the scope of politically exposed persons, regulating new contraventions, extending authorities` sanctioning powers – an element of absolute novelty for Romania is the Beneficial Ownership Register.
In this respect, Article 30 of the Directive requires all Member States to incorporate into national law provisions regarding information on beneficial owners of corporate or legal entities.
The Directive thus establishes that a key factor in tracing offenses is to identify any individual exercising the right of ownership or control of a legal entity.
Furthermore, identification and verification of real beneficiaries should be extended to legal entities that own other entities and they should be required to look for the individual(s) who ultimately exercises control through ownership or other means.
Who is the beneficial owner?
For the purpose of the Directive, the concept of beneficial owner refers to any individual who ultimately owns or controls the legal entity and / or the individual on behalf of or in the interest of whom a transaction is, directly or indirectly, carried out.
The scope of the concept includes individuals who ultimately own or control a legal entity through:
- Holding a sufficient percentage of the share capital or voting rights
- Equity interest in the entity, including holding bearer shares
It is considered that a shareholding of 25% plus one share or an ownership interest of more than 25% is an indication of direct ownership, Also, the shareholding of the same percentage by one or more legal entities which are under the control of the same individual is an indication of indirect ownership.
However, the Directive gives Member States the freedom to decide that holding a lower percentage may be a presumption of ownership or control over the entity.
In cases where, after having exhausted all means of verification, no person fulfilling the aforementioned criteria was identified or whether such identification was successful but there is still doubt regarding the real beneficial owner, this capacity will be assigned to individuals in senior management positions.
Why is such Registry required?
The obligation to set up a Beneficial Ownership Register is based on the need to strengthen transparency as well as to fight misuse of legal entities and implies that Member States are required to obtain and hold adequate, accurate and up-to-date information about real beneficiaries. Member States should therefore ensure that entities registered within their territory under applicable national law have, in addition to basic information, those regarding real beneficiaries which should be kept in a central register and be accessible to:
- Competent authorities and financial institutions, without restriction and without alerting the concerned entity;
- Credit and financial institutions, within the framework of customer due diligence measures;
- Any person or organisation that can prove a legitimate interest in money laundering, terrorism financing and related crimes, such as corruption, tax offenses, fraud.
Which are the exceptions?
Member States may restrict the access of entities referred to in (i) and (ii) above with respect to all or some of the information on the beneficial owner, if such access would expose him to the risk of fraud, kidnapping, blackmail, violence or intimidation or if he is a minor or is under any form of incapacity.
When in Romania?
Although the deadline for implementing European standards has been exceeded by more than 6 months, efforts have halted in Romania. In concrete terms, the National Office for Prevention and Control of Money Laundering has published in May 2017 a draft bill – the Law on prevention and fighting money laundering and terrorism financing – which was to adapt the national legal framework and bring it in line with the Directive`s provisions.
As far as the Beneficial Ownership Register is concerned the draft bill provides that it should be established within the National Trade Register Office for companies, within the Ministry of Justice for NGOs, the National Agency for Fiscal Administration for fiduciaries and the Central Depository for companies listed on regulated markets.
Although the legislative proposal seems to include all the measures imposed by the Directive and despite the consultations that have already been held with the relevant institutions (Ministry of Justice, General Prosecutor`s Office, Directorate for Investigating Organized Crime and Terrorism), the draft bill seems blocked at the National Office for Prevention and Control of Money Laundering and there are no indications that such regulations will be adopted in the near future.
Given that Romania did not notify any transposition measures, in December 2017, the European Commission, having granted the opportunity to submit its comments on the letters of formal notice transmitted in July 2017, firmly asked Romania to take the necessary measures to fully comply with the Directive.
This is not the first of the European rules in respect of which Romania is late - there are a number of other European Directives that have not been transposed in time or at all while on December 20, 2017 EU ambassadors announced that an agreement had been reached between the European Parliament and the Council on the amendments proposed by the European Commission through the Fifth Anti Money Laundering Directive.