Globally there has been an increasing focus on the need for transparency in business, especially in relation to ownership and tax requirements. Many governments have translated the call for openness into formal reporting of beneficial ownership, increasing the need for companies to assess their structure and ensure they meet varying local disclosure requirements. A key example of this is the introduction of the 4th Anti-Money Laundering Directive (4th AML Directive) from the European Union (EU). Among other measures designed to combat money laundering and terrorist financing, the 4th AML Directive requires EU member states to set up registers of the ultimate beneficial owners (UBOs) of legal entities. It was left up to individual member states to determine how to implement the Directive, and in doing so, member states have taken different approaches.
The deadline for EU member states to adopt legislation to implement the 4th AML Directive was 26 June 2017, yet debates are still ongoing about how the Directive should be implemented, who should have access to the registers and how much the legislation will improve transparency in practice.
One of the key concerns with the implementation of the Directive is around data privacy, with some debate about who should be given access to the register and for what purpose. According to the Directive, the information should be available to the relevant authorities, financial intelligence units and any person or organization who can demonstrate a ‘legitimate interest’. It is currently optional for member states to make the beneficial ownership register publicly available, however the European Commission, the European Parliament and the Council of the European Union have recently agreed on an amendment to the Directive in the form of a 5th Directive which makes it mandatory for the register to be public.
This document provides an initial overview on the current status quo of the implementation of the 4th AML Directive, especially the different requirements to identify and register UBOs in various EU member states. Failing to comply with the registration requirements may result in substantial fines in the various EU member states. As such, it is recommended that all companies having a UBO in the sense of the 4th AML Directive get acquainted with the new regulations to ensure you are compliant with the UBO registration requirements in each EU member state where you operate a legal entity.