The European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2016 have been in force in Ireland since November 2016. These Regulations require almost every company incorporated in Ireland to identify their ultimate beneficial owners and to record particulars of those owners on internal beneficial ownership registers. There are ongoing obligations to update these registers as necessary and the obligations in the Regulations extend to other corporate bodies which are not companies, such as Irish Collective Asset management Vehicles. The penalty for non-compliance is a fine of up to €5,000.
A “beneficial owner” in this context is a natural person who ultimately owns or controls over 25% of the equity or voting rights in the entity in question. This ownership or control can be direct, with the individual owning shares in the entity itself; or indirect, with the individual owning, for example, a sufficient percentage of shares in a parent company of the entity in question, no matter how far up the corporate chain.
Should the directors of an entity be unable to identify any beneficial owners, then they are obliged to record the particulars of the senior management of the entity on the beneficial ownership register.
The Regulations represent the first part of an anticipated two part process designed (at the time of their coming into force) to implement the EU’s Fourth Anti-Money Laundering Directive (“4AMLD”). The process will ultimately see the particulars of each entity’s beneficial ownership collated on a central register, administered by the CRO. Filing will be electronic and there will be no fee.
Further legislation will be necessary to implement this step and the Department of Finance has advised that it would delay the publication of any further legislation until the Department had considered the Fifth Anti-Money Laundering Directive (“5AMLD”), which came into force on 9 July 2018. At the time of writing, no such legislation has been made.
5AMLD at least theoretically extends the deadline for the establishment of the central register in Ireland until January 2020, although current indications are that the register will open at some point during the fourth quarter of 2018 with a three month window for filing
The main question to be answered by the legislation is: who will be entitled to the information on the register?
The CRO guidance to date does not address this issue, nor do the Regulations currently in place, which deal with the first step in the process and concern themselves with the identification of beneficial owners and the creation of internal registers.
4AMLD requires EU Member States to ensure that information on beneficial ownership of entities is accessible by:
- competent authorities and financial intelligence units, without exception – that is, law enforcement agencies and similar State bodies;
- entities which are required to carry out due diligence on their customers for the purposes of anti-money laundering legislation; and
- any person or organisation that can demonstrate a legitimate interest.
This third limb caused some uncertainty – raising questions as to what is a “legitimate interest”, who will decide whether a person has demonstrated such an interest and what, if any, process for decision making and appeal will be put in place.
The matter has been clarified by 5AMLD, which provides that members of the public will be able to access the information on the central beneficial ownership register – including details of the owners’ names, month and year of birth, country of residence and nationality, along with the nature and extent of an owner’s beneficial interest.
Until the publication of the anticipated legislation, Irish limited companies and other relevant entities should prepare for the establishment of the central register by ensuring that their internal beneficial ownership registers are up to date and that their beneficial owners are aware that their details will soon become centralised and open to public inspection.
Nicholas Metcalfe, Senior Associate, Mason Hayes & Curran, firstname.lastname@example.org
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