Irrespective of the Automatic Exchange of Information (AEoI) and other OECD initiatives, the ultimate beneficial ownership (UBO) register leads to further transparency. Beneficial owners of entities (including, for example, trusts and foundations) domiciled in the EU are already required to be documented in a UBO register, which is publicly accessible in some countries. Additional countries are also planning to implement such UBO registers.
Defining the beneficial owner
The UBO register established under the 4th Anti-Money Laundering Directive (AMLD 4) of the EU is a country-specific central register that lists beneficial owners of companies, trusts, foundations as well as other legal arrangements similar to trusts.
In the case of corporate entities, the beneficial owner is defined as the natural person who ultimately owns or controls, directly or indirectly, more than 25% of the shares or voting rights, or controls the entity through other means.
With regards to trusts and other legal arrangements similar to trusts, the trustees must file in the UBO register the information referred to below of the following persons:
- Protector (if any)
- Beneficiaries or the class of beneficiaries, and
- Any other person who has ultimate control over the entity.
Minimum information requirements
At least the following information must be included in the UBO register for the persons mentioned above:
- Month of birth
- Country of residence, and
- Nature and size of the beneficial interest held by the beneficial owner.
Some countries provide for additional information to be reported.
Countries determine individually who has access to the register and whether it is publicly accessible at all. However, at least the following must have access to the UBO register:
- Investigative services, competent authorities and EU financial intelligence units
- In addition, when conducting their client due diligence services, specific professional groups such as banks, notaries or lawyers, and
- Any person or organization that can demonstrate a legitimate interest.
In July 2018, the 5th Anti-Money Laundering Directive (AMLD 5) of the EU entered into force. According to the AMLD 5, the register for companies will be made accessible to the general public in early 2020 and the register for trusts and similar legal arrangements will be made accessible to persons with a legitimate interest at the latest on 10 March 2020.
An exemption from such access to the register may be allowed in exceptional cases such as the exposure of the beneficial owner to a risk of fraud, kidnapping, blackmail, violence or intimidation, or where the beneficial owner is a minor or otherwise legally incapable.
Increased transparency in the EU – and beyond?
The UBO registers increase transparency within the EU. Furthermore, other countries around the world maintain similar UBO registers, e.g. the British Virgin Islands, Singapore or New Zealand. And there are signs that more countries will follow this direction by implementing their own UBO register. For example, Liechtenstein is establishing such a register as of 1 January 2019. Switzerland has announced no intention to introduce such a UBO register.
With regards to public accessibility, it remains to be seen how strictly the access will be limited and how each member state will define the term “legitimate interest”.