Governance & Compliance Update: Beneficial Ownership and the Fifth Anti-Money Laundering Directive
04 July 2018
The Fifth Anti-Money Laundering Directive (5AMLD) came into force on 9 July 2018. 5AMLD makes numerous amendments to the Fourth Anti-Money Laundering Directive (4AMLD). The amendments proposed in 5AMLD are limited to what is necessary to achieve the objectives of tackling terrorist financing and increasing the transparency of financial transactions and legal entities. 5AMLD must be transposed into national law by 10 January 2020. We focus on the impact 5AMLD will have on collection and maintenance of information relating to the beneficial ownership of Irish corporates and trusts.
History of 5AMLD
By way of recap, 4AMLD required all EU Members States to transpose into national law provisions around the collection and maintenance of information relating to the beneficial ownership of corporates and trusts by June 2017. As an initial step to satisfy the requirements of 4AMLD, Ireland introduced a statutory instrument (SI560 of 2016) which took effect in late 2016. It required certain corporates to hold adequate, accurate and current information on their beneficial owners in registers maintained and held by them.
Further legislation was required in Ireland to satisfy the requirement to provide:
- A central register to hold the beneficial ownership information for corporates
- The establishment of a beneficial ownership register requirements for trusts
- Access to these registers
The June 2017 deadline under 4AMLD was not met by Ireland. However, as a result of 5AMLD, the relevant deadlines have been extended. In addition, 5AMLD has made amendments to clarify certain provisions that impact on the central register of beneficial ownership of corporates and on the setting up of beneficial ownership registers for trusts.
Beneficial ownership of corporates
The deadline for Ireland to establish the central register of beneficial ownership of corporates has been extended to 10 January 2020. Notwithstanding this revised deadline, the Companies Registration Office has indicated in recent weeks that legislation is expected in the coming months assigning separate legal responsibility to the Registrar of Companies for the establishment and maintenance of the central register of beneficial ownership of corporate entities. It is anticipated that there will be an extended time-frame to file details on this central register.
Arising from 5AMLD, the public will be permitted to access the central register for corporates. This is in addition to competent authorities, Financial Intelligence Units (FIUs), and obliged entities which were identified in 4AMLD. At a minimum, the public will be entitled to access the name, month and year of birth, country of residence, and nationality of the beneficial owner. They will also be able to access the nature and extent of the beneficial interest held.
Beneficial ownership of trusts
Irish legislation is required to be put in place to oblige trustees of any express trust and similar legal arrangements to hold adequate, accurate and up to date information on the beneficial ownership of those trusts. The information will include the identity of the settlor, the trustee, the protector (if any), the beneficiaries and any other person exercising control of the trust. The deadline under 4AMLD for this requirement was June 2017 but this has now been extended to 10 March 2020 under 5AMLD.
Ireland will also have to establish a central register for keeping the beneficial ownership information of express trusts and similar legal arrangements. We have no visibility to date on what body will be responsible for establishing and maintaining this central register.
5AMLD has broadened the scope of persons permitted to access the central register of beneficial ownership of trusts. Access will be granted to competent authorities, FIUs without restriction, obliged entities and, on a more limited basis, any natural or legal person that can demonstrate a legitimate interest.
If the trustee is based outside of the EU, then the relevant Member State in which beneficial ownership information will have to be filed will be the one where the trustee establishes a business relationship or acquires real estate in the name of the trust. Where trustees are located in a number of Members States, an extract of the beneficial ownership information in a central register in one Member State may be considered as sufficient proof of registration for the other Members States.
Other changes to be introduced by 5AMLD include:
- Member States will be required to have mechanisms in place to ensure that the information held in the central registers will be adequate, accurate and current. These mechanisms include requiring obliged entities and, in certain circumstances, competent authorities to report any discrepancies they find between the beneficial ownership information available in the central register and the beneficial ownership information available to them.
- Members States may choose to make the information held on the national central registers accessible online and for a fee.
- Central registers should be interconnected by a European platform by 10 March 2021.
4AMLD made provision for Member States to make an exemption from access to certain beneficial ownership information for various reasons linked to the security of the beneficial owner. 5AMLD broadens the terms of what is considered a security risk and it also permits Members States to provide a similar exemption to cover access to the beneficial ownership information in respect of trusts.
The changes introduced in 5AMLD provide further clarity in respect of the obligations of Member States relating to the collection and maintenance of, and provision of access to, the central registers of beneficial ownership of corporates and trusts. We will continue updating you on any further Irish legislation introduced to comply with the obligations set out under 5AMLD.
For more information on 5AMLD and how it affects your organisation, contact a member of our Corporate Governance & Compliance team.
The content of this article is provided for information purposes only and does not constitute legal or other advice.