On 15 November 2016, far reaching provisions on the beneficial ownership of all companies and other legal entities incorporated in Ireland came into force with immediate effect.
Previously, the identity of the beneficial owners of Irish companies and legal entities could remain largely private, but this is no longer the case and immediate action is required by directors to ensure compliance.
The European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2016 (Regulations) came into immediate effect on 15 November, without any transitional periods. The Regulations are a first step in Ireland's transposition of the EU's Fourth Anti-Money Laundering Directive (MLD4), which is designed to increase the transparency of corporate ownership in order to combat money laundering, terrorist financing and tax evasion across the EU.
The Regulations apply to all Irish companies and other corporate bodies, including, for example, ICAVs and industrial and provident societies (Relevant Entities). It is therefore important that the directors of such entities are aware of the obligations imposed by the Regulations.
The Regulations do not apply to companies that are already subject to disclosure requirements because they are listed on a regulated market or if they are subject to equivalent international standards on transparency of ownership disclosure.
Whilst the Regulations do not currently apply to trust structures, it is possible that this may change during 2017 as a result of new rules that are expected to be introduced at an EU level.
For the purposes of the Regulations, broadly speaking, a beneficial owner is any person owning or controlling an interest of 25% or more in a company, whether directly or indirectly. The Regulations require directors to identify a natural person, not a corporate or other body, who holds an interest in the Relevant Entity, at the level set out above.
Every Relevant Entity must take all reasonable steps to obtain and hold adequate, accurate and current information in respect of its beneficial owners. This includes writing to any person that it has reasonable cause to believe is a beneficial owner, and requesting that person to provide, within one month, the information that is needed for the register. The Regulations require such persons to respond, and so shareholders also have obligations under the Regulations, which may assist directors in obtaining the necessary information.
The Regulations require Relevant Entities to establish and compile the following pieces of information in relation to each beneficial owner: name, date of birth, nationality, address, a statement on the nature and extent of the interest that is held, and the date(s) on which a person became or ceases to be a beneficial owner.
Relevant Entities are required to record the above information in a register of beneficial ownership (Register) and must take measures to update the Register as appropriate.
The Regulations do not provide for a group exemption. Accordingly, each Relevant Entity within a corporate group must establish its own Register, even where the ultimate beneficial owner of all the Relevant Entities in that group is the same.
Where a Relevant Entity has taken all reasonable steps to ascertain its beneficial owner(s) but has been unable to do so:
A failure by a Relevant Entity or an individual to comply with their obligations under the Regulations is a criminal offence and any Relevant Entity or individual that commits such an offence can be liable for a fine of up to €5,000 on summary conviction.
Not currently, but this may change in the near future.
The remaining provisions of MLD4 are expected to be implemented into Irish law by June 2017 and will ultimately result in the Companies Registration Office maintaining a central register of beneficial ownership. It is not yet clear what form the central register will take. At a minimum, the central register will be accessible to competent authorities (e.g. the Revenue Commissioners), financial intelligence units and those carrying out certain forms of due diligence under MLD4.
It remains to be determined whether the central register will be accessible to the public. Currently, under MLD4, EU member states have discretion on the extent of accessibility of the central register and a number of member states, most notably the UK, have made their central registers accessible to the public.
The European Commission is currently considering a number of amendments to MLD4 (that are commonly referred to as MLD5). Most notable among the changes proposed by MLD5 is a proposal that information on the beneficial ownership of companies should be available to the public. If adopted, those changes are likely to be implemented into Irish law, with the rest of MLD4, in June 2017.
Directors should be aware that the new regime on beneficial ownership is likely to be subject to further amendments in the coming months.
This article was first published on Accountancy Ireland Online on 21 December 2016.