In the context of the fight against money laundering and terrorist financing, the European Union (EU) adopted on May 20th, 2015 Directive (EU) 2015/849 (known as “4th AML Directive”) and on May 30th, 2018 Directive (EU) 2018/843 (known as “5th AML Directive”) (the “Directives“). These Directives provide for a series of measures to prevent the use of the financial system for the purpose of money laundering and terrorist financing, in particular by setting up a centralised register of the beneficial owners of legal entities registered with the Luxembourg Trade and Companies Register (RCS)1 (the “Register“).
The transposition of Directives:
As part of the transposition of these two Directives, Luxembourg adopted on January 13th, 2019 and published in the Journal Officiel on January 15th, 2019 the law (the “Law”) establishing the Register of beneficial owners of legal entities registered with the RCS (the “Legal Entities”). This Law already includes certain provisions of the 5th AML Directive, while the latter leaves Member States a transposition deadline ending on January 10th, 2020, including the provisions related in particular to the access for consultation to the Register to any person without having to justify any legitimate interest.
The Register will centralize the information on beneficial owners as defined by the Law of November 12th, 2004 related to the fight against money laundering and terrorist financing (the “AML Law“)2 of Legal Entities, with the exception of listed companies whose securities are admitted to trading on a regulated market, which will only be required to register in the Register the name of the market on which their securities are admitted to trading.
Information to be included in the Register:
The Legal Entities will themselves have to collect the following information from their beneficial owners: name, first name, nationality, date and place of birth, country of residence, precise private or business address, Luxembourg or foreign identification number as well as the nature of the effective interests held and the extent of these interests of each beneficial owner and the supporting documents relating thereto, the list will be determined by Grand-Ducal regulation (not yet published) (the “Information“). This Information must be adequate, accurate and current, which requires updating each time one or more of this Information changes.
The mandatory collaboration of the beneficial owners:
In the context of the collection of Information, the Law requires any beneficial owner to cooperate with the Legal Entity of which he is the beneficial owner and to provide the Legal Entity with adequate, accurate and current Information concerning him under penalty by a fine ranging from EUR 1.250,00 to EUR 1.250.000,00.
Registration of the Information in the Register:
The filing and entry in the Register held by the RCS of the Information is the responsibility of the Legal Entities or the agent that the Legal Entities may designate as intermediary.
This process will be effectuated electronically on the RCS website within one month of the event requiring the Information to be recorded or modified.
Access to the Register:
Access to the Register will be by electronic means and can be differentiated between:
- the national authorities who, in the course of their duties, will have access to all the Information recorded, and
- the public, who will be able to consult the same Information, with the exception of the address of the beneficial owner and his national identification number.
The computer system used by the national authorities to access the Register will be secured by authentication and must keep for five years information on the person who proceeded to the consultation, the information consulted, the date, time and reference of the file in connection with which the consultation was carried out and the precise reason for the consultation. No information related to a consultation of the data in the Register by a national authority may be communicated to Legal Entities or beneficial owners.
With regard to the procedures for access by the public to the Register, the Law refers to the Grand-Ducal regulation, which has not yet been finalised.
However, in the event of a disproportionate risk, such as the risk of blackmail, kidnapping or violence, the Legal Entities or their beneficial owners will be able, on a duly justified basis, to request the RCS to limit the access to the Information for a maximum period of 3 years, renewable, to certain categories of persons only.
The Law also requires that the national authorities having access to the Register and any professional subject to the AML Law to inform the RCS of the existence of erroneous data or the absence of all or part of the data of a beneficial owner within 30 days of this finding.
The conservation of the Information at the registered office:
The Information collected must also be kept at the registered office throughout the existence of the Legal Entity and must be kept up to date so that it is always adequate, accurate and current.
Thereafter, the place where this Information will be kept for a period of five years following the removal of the Legal Entity from the RCS must be designated and registered with the RCS.
It should be noted that, upon the request of the competent authorities, the Legal Entities will be required to make available, within 3 days of the request, the Information on their beneficial owners and the information on its owner (Legal Shareholder).
Finally, the Law provides for fines ranging from EUR 1.250,00 to EUR 1.250.000,00 against the Legal Entity that (i) fails to submit to the Register within the prescribed time limits a request for registration or amendment of the beneficial owner Information or (ii) knowingly submits a request for registration of inaccurate, incomplete or non-current Information or (iii) fails to obtain and retain all Information at the registered office or (iv) knowingly provides to national authorities or professionals subject to the AML Law, as part of their due diligence measures, incorrect or non-current Information.
Entry into force of the Law:
The law will come into force on March 1st, 2019.
The Legal Entities will have 6 months to comply with their obligations. With regard to the access for consultation to the Register, it will only be possible after the expiry of this 6-month period.
1 The Directives also provide for the establishment of a register of fiducies, whose Bill 7216b, currently under discussion in the Parliament of Luxembourg, will transpose the provisions into Luxembourg law.
2 By ‘beneficial owner’ means any natural person(s) who ultimately owns or controls a legal entity and/or the natural person(s) on whose behalf a transaction or activity is being conducted and includes at least:
- the natural person(s) who ultimately owns or controls a legal entity through direct or indirect ownership of a sufficient percentage of the shares or voting rights or ownership interest in that entity, including through bearer shareholdings, or through control via other means, other than a company listed on a regulated market that is subject to disclosure requirements consistent with Union law or subject to equivalent international standards which ensure adequate transparency of ownership information.
A shareholding of 25 % plus one share or an ownership interest of more than 25 % in the legal entity held by a natural person shall be an indication of direct ownership. A shareholding of 25 % plus one share or an ownership interest of more than 25 % in the legal entity held by a corporate entity, which is under the control of a natural person(s), or by multiple corporate entities, which are under the control of the same natural person(s), shall be an indication of indirect ownership.
- if, after having exhausted all possible means and provided there are no grounds for suspicion, no person under point (i) is identified, or if there is any doubt that the person(s) identified are the beneficial owner(s), the natural person(s) who hold the position of senior managing official(s).