MLD4 requires that entities hold information on their Beneficial Owners. The information should also be held on a national register. The purpose of these new requirements is to address transparency issues relating to corporate and legal entities, trusts etc.
Early enactment of Beneficial Ownership Statutory Instrument by Dept. of Finance
The Department of Finance published an article on the overview of a new Irish regulation on Beneficial Ownership on 31 January 2017. Article 30(1) of MLD4 is transposed by the statutory instrument entitled‘European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations’. The Statutory Instrument requires corporate and other legal entities (‘entities’) incorporated in this State to hold adequate, accurate and current information on their beneficial owners, including details of the beneficial interests held.
The reason for the early transposition of this provision is to ensure that entities have time to gather the necessary beneficial ownership data and to record it in their own corporate beneficial ownership registers. This enables the National Central Register of Beneficial Ownership to be effective from as early a date as possible after full transposition. It has not yet been confirmed who will operate the Central Register.
Who is a beneficial owner?
The purpose of this MLD4 provision is to identify who really owns and/or controls a company. A beneficial owner is an individual who ultimately owns or controls the entity. According to the Statutory Instrument, if the entity either cannot identify the individual who is the beneficial owner, or identifies an individual who may be a beneficial owner, but cannot be certain, the entity must instead list its “senior managing officials” (i.e. its directors and CEO) in its Register as being its beneficial owners. This should only occur after every effort has been made to correctly identify the beneficial owners. It must also keep a record of the steps that it took to identify its beneficial owners.
How is beneficial ownership established?
If an individual holds 25% plus one share, or another form of ownership interest exceeding 25% (i.e. voting rights), this indicates direct ownership.
If a company or companies controlled by an individual together hold more than 25% of the shares, or other ownership interest exceeding 25%, this indicates indirect ownership (i.e. indirect interests can be aggregated) and that individual will be a beneficial owner.
Member States have discretion to decide that a lower percentage than 25% should be used as the threshold, Ireland has not done so though obliged entities may do so as part of their own AML policy.
What do corporate and legal entities have to do now?
Entities must establish who their beneficial owners are by reviewing the information they hold on an individual and deciding whether the individual has declared themselves as a beneficial owner or the entity has cause to believe that they are a beneficial owner and act accordingly to gather the required information.
Where the entity has cause to believe an individual is a beneficial owner, the entity must give that individual a notice asking him to confirm whether he is a beneficial owner and if he is, asking that he confirm or correct the details included in the notice. The notice should state that the individual must comply within 1 month.
If the entity believes that someone else has information about one of the entity’s beneficial owners or another person who may have information about one of the entity’s beneficial owners, they must serve a notice on that individual looking for the information (the recipient may justify non-disclosure on the basis of legal professional privilege, if relevant).
Once all the necessary details have been gathered, they should be recorded on the entity’s register.
What information is required?
The entity must enter the following information in their register in respect of each beneficial owner:
- date of birth;
- residential address;
- statement of nature and extent of interest held by that beneficial owner;
- date on which that person was entered in the Register as a beneficial owner; and
- date on which that person ceases to be a beneficial owner, if applicable.
If the entity believes that an individual has ceased to be a beneficial owner, or a beneficial owner’s particulars on the register have changed, the entity must give notice to that individual, seeking confirmation as to whether the change has occurred (unless it has already been informed of the change by or on behalf of that individual).
Who is out of scope?
The Irish Statutory Instrument applies to every legal and corporate entity except for those:
- listed on a regulated market and subject to disclosure requirements that are consistent with EU law (i.e. the Transparency Directive); and
- entities already subject to equivalent international standards in respect of the transparency of information on beneficial ownership.
What will happen if your organisation does not comply?
Failure by an entity to comply with the obligations contained in the AML Regulations is an offence and they can be liable on summary conviction to a fine not exceeding €5,000 (Class A offence). It is also an offence for an individual to fail to comply with his/her obligations under the AML Regulations, including failing to comply with the terms of the notice received from the entity.
How can we help?
Our multi-disciplinary team can help you to:
- create a register for each of the companies in each of the obliged entity’s group;
- advise obliged entities on the steps necessary to obtain the requisite information on its beneficial owners and those of the other companies in its group;
- assist in identifying beneficial owners;
- evaluate and update, where appropriate, your monitoring programme; and
- provide workshops and training on the purpose and maintenance of the register.
Why choose Grant Thornton?
Grant Thornton has carried out a number of assignments for a variety of clients enabling us to bring industry insight and knowledge of best practices in relation to the new measures required under the Fourth Money Laundering Directive. We have the best people and processes available to serve you.