UBO Reporting Requirements in Europe

The global drive towards corporate transparency has seen an increasing number of jurisdictions adopting Ultimate Beneficial Ownership register (UBO) reporting requirements. The European Union’s 4th Anti-Money Laundering Directive introduced Beneficial Ownership reporting obligations to countries within the European Union.

Furthermore, a growing number of third party countries are introducing equivalent, or similar legislative requirements. Currently over 25 European jurisdictions have embedded the new obligations into domestic law and ensuring compliance in this area can be a complex task for multinational firms.

How does this affect your business?

The first step for companies that fall under scope of the relevant legislative requirements is to look at their corporate structures and identify their beneficial owners. This can often be done by simply examining the ownership structure of a legal entity in question and identifying individuals with ‘significant control’ over the company. Things can get trickier when the definition of a ‘beneficial owner’ begins to differ in each jurisdiction and there is rarely much clarity on how the concept should be interpreted.

The information on a legal entity’s beneficial ownership needs to be kept up-to-date internally and filed with the relevant registry. The complete procedure varies with each country and can range from simple one-off electronic filings in Denmark or the United Kingdom to Germany’s required annual communications with shareholders. Either way, it is essential to ensure the transparency file always contains the most recent documentation of the corporate structure.

The new requirements must not be taken lightly. Failure to comply can have wide-ranging implications on companies or their management. The most common form of penalty for failure to comply is a monetary fine and the figures are known to have reached up to EUR 1.25 million in some cases. Other forms of action against companies can include restriction of profit distribution. In some jurisdictions, as in Serbia, prison sentences of up to 5 years can result for the intentional withholding of information. 

Staying compliant

Corporate transparency is a delicate matter. The need for privacy must be balanced against the newly introduced beneficial ownership reporting obligations and it is important to be aware of what information the authorities are expecting to receive. This way you can make sure you provide enough information. This becomes particularly relevant with the upcoming implementation of 5th EU Anti Money Laundering Directive, which will make information on corporate beneficial ownership publicly accessible. As these requirements are relatively new and in a state of flux, it’s critical to stay aware of what is required to keep entities in compliance and this is often an ongoing process.

This is why, for Citco GSGS, it is an essential part of our service to make sure our clients receive the most up-to-date information on the latest developments. Our global presence allows us to arrange the necessary filings even in jurisdictions where physical attendance is needed and ensure all your companies comply with the UBO disclosure requirements.

Erikas Sareika, Senior Legal Officer, Vilnius
Citco GSGS Focus – Summer 2019