Regulators seek beneficial ownership transparency

The Panama Papers revealed how complex and opaque corporate ownership structures can be used to hide criminal activities and tax obligations. However, regulatory initiatives that aim to improve ownership transparency were already underway. 

Changes underway in Europe

At an EU level, although the fourth Money Laundering Directive (MLD4) already contained provisions for the identification of ultimate beneficial owners (UBOs), in June 2016 the European Commission was compelled to propose amendments which would, in their view, further improve the transparency of this information. 

Within certain European countries legislation has already either been enacted or proposed to provide for the recording and identification of UBOs, in some cases to aid MLD4 transposition. Examples of this are Ireland and the UK.

In Ireland, a regulation published in November 2016 transposes Article 30(1) of MLD4 into law in Ireland and requires Irish companies to take all reasonable steps to identify their UBOs and place this information on a register. A UBO is an individual who, directly or indirectly, holds at least 25% of the capital or voting rights or otherwise retains control.

In the UK, following an update to the Companies Act 2006, from 6 April 2016 UK companies and LLPs are required to hold and maintain a register of people with significant control. A 25% threshold is used in the calculation of control or influence deemed to be significant for the purpose of inclusion on the register. 

Uruguay proposes low threshold

Legislation proposed in Uruguay requires that certain resident and non-resident entities report to the Central Bank of Uruguay the identities of individuals who, directly or indirectly, hold at least 15% of the capital or voting rights or otherwise retain control. 

Cayman Islands consultation

A public consultation period on new UBO legislation commenced in the Cayman Islands on 16 December 2016. Comments on the draft bills were due by 5 January 2017. If approved in the Legislative Assembly, the bills will require the creation of a centralised platform of UBO information by 30 June 2017. Worth noting here is a proposed change in the previously defined UBO threshold from 10% to 25%.

US FinCEN issues UBO rule

On 5 May 2016, FinCEN in the US issued its long-awaited final rule on beneficial ownership with respect to customer due diligence requirements. The final rule requires covered financial institutions to adopt due diligence procedures to identify and verify a legal entity customer’s UBO at the time a new account is opened. A 25% ownership threshold is again applied here. Compliance is required by May 2018. 

Singapore expands customer definition

In Singapore, an AML regime came into effect in May 2015 in which the definition of “customer” was expanded to include the underlying investors in funds managed by Singapore licensed managers. This means that, subject to certain limited exemptions, look-through to UBOs with greater than 25% holdings is required. 

Unique to Singapore is a requirement for the identification and verification of the investor’s authorised signatories who are executing transactions on its behalf, subject to certain exemptions.

8th March 2017

Our contacts

Ian McCarthy

Ian McCarthy

Senior Compliance Manager, Group Compliance

T+353 (0) 1 636 7100
Eiamccarthy@citco.com
LDublin