Background: implementation of the Fourth and Fifth Anti-Money Laundering Directives
This newsletter gives a brief overview of the practical aspects of a new obligation for Belgian entities to gather information about their ultimate beneficial owners (UBOs) and enter it in a central UBO register.
In its fight against the use of the financial system for the purposes of money laundering or terrorist financing, the European Union has imposed far-reaching measures – including the requirement for EU member states to each establish a central UBO register – by means of the Fourth and Fifth Anti-Money Laundering Directives (Directives 2015/849 and 2018/843). In Belgium, most of the Directive's provisions have been implemented in national law through the Act of 18 September 2017 for the prevention of money laundering and terrorist financing and for the restriction of the use of cash ("the Act"). The Act provides for the establishment of a Belgian UBO register, but does not elaborate on the modalities in this regard.
The Royal Decree of 30 July 2018 on the working modalities of the UBO register (the "Royal Decree") has now finalised the implementation process by providing detailed rules on the operation of the UBO Register. The focus of this newsletter is on entities other than foundations, trusts and Belgian or international non-profit organisations, for which the Royal Decree sets out similar (but not identical) rules.
Who are an entity's UBOs?
Under the Act, the UBOs of an entity consist of the following individuals (natural persons):
(i) the individual(s) who ultimately owns/own or controls/control that entity through direct or indirect ownership of a sufficient percentage of the voting rights or shares or other ownership interest in that entity;
(ii) the individual(s) with control over the entity by other means (such as a shareholders' agreement).
With regard to (i), where an individual holds more than 25% of the voting rights or a shareholding or other ownership interest of more than 25%, this will constitute an indication of direct ownership by that individual. Where the relevant voting rights or shareholding or other ownership interest are/is held by an entity that is under the control of one or more individuals, or by multiple entities that are under the control of the same individual(s), this will constitute an indication of indirect ownership by the individual(s) in question.
(iii) If, after having exhausted all possible means and provided there are no grounds for suspicion, no individual meeting the criteria of points (i) or (ii) is identified or if there is any doubt that the individual(s) identified is/are the beneficial owner(s), the individual(s) who holds/hold the position of senior managing official(s) of the entity will be deemed to be its UBO(s). Where this is the case, records of the steps taken to identify the entity's UBO(s) must be drawn up and kept.
What information must be disclosed?
Article 3 of the Royal Decree sets out fifteen items of information that must be disclosed about each UBO:
2) first name;
3) day of birth;
4) month of birth;
5) year of birth;
7) country of residence;
8) full residential address;
9) the date on which the individual became a UBO of the entity;
10) identification number in the Belgian National Register (or equivalent foreign register);
11) type of UBO according to article 4(27)(2)(a) of the Act;
12) whether the individual is a UBO of the type identified under (11) alone or together with other UBOs;
13) whether the individual is a direct or indirect UBO;
14) in the case of an indirect UBO, detailed information about intermediaries;
15) the size of the total interest in the entity.
What are the modalities and deadlines for compliance with the disclosure obligation?
The UBO register will be maintained by the Federal Public Service for Finance (the General Administration of Treasury).
The entity's directors or legal representatives must enter the requisite information in the UBO register before 30 November 2018 or, in the event of subsequent changes in the composition or details of the UBOs, within a maximum of one month following the change in question. In addition, the UBO information in the register must be confirmed annually. The medium for the disclosure, updating and confirmation of UBO information will probably be the electronic MyMinFin platform, for which a Belgian e-ID is required.
Failure to comply with the disclosure requirements in a timely manner is punishable by a court-imposed fine ranging from EUR 50 to EUR 5,000 (art. 155 of the Act). Furthermore, in some cases the Minister of Finance can impose an administrative penalty ranging from EUR 250 to EUR 50,000 (art. 132(6) of the Act), taking into consideration the circumstances of non-compliance.
Who can access the information?
Everybody will have access to the UBO register. However, the Royal Decree distinguishes three categories of parties with different access rights:
(i) the competent authorities (i.e. those entrusted with enforcement of the anti-money laundering rules, such as the Belgian tax authorities);
(ii) "obliged entities" (i.e. parties that are required to apply the anti-money laundering rules when providing professional services, e.g. banks, lawyers and auditors; these parties are listed in article 5 of the Act);
(iii) members of the general public.
A UBO will not be notified when a search of the UBO register involving his/her information is performed. However, UBOs will (most likely through the MyMinFin application) receive a copy of all information recorded about them in the register.
While the competent authorities and obliged entities will have access to all information, members of the general public will only have access to items 1, 4-7, 9 and 11-15 of the list given above. Obliged entities and members of the general public will have to pay a fee (still to be determined) to access the UBO register.
Some of the technical modalities regarding access to the UBO Register still have to be finalised. However, it is already clear that information requests will be archived for ten years.
In order to safeguard the personal privacy and security of UBOs, two main limitations apply: firstly, it will not be possible to perform a general search to receive a list of all entities of which an individual is a UBO (i.e. searches are only possible per entity using the entity registration number); secondly, a UBO can request that all or part of the information about him/her in the register be kept confidential and not disclosed (e.g. if disclosure would expose the UBO to a disproportionate risk or a risk of being kidnapped, if the UBO is a minor, etc.)
What should entities do now?
Now that it is clear what information must be disclosed, entities are advised to ensure that all the relevant data is gathered and that a legal representative of the entity has her/his e-ID (with pin code) ready. It goes without saying that we will inform you as soon as the UBO register becomes operational or if there are any other relevant developments.
Update regarding the Netherlands
The Implementation act of the Fourth Anti-Money Laundering Directive entered into force in the Netherlands on 25 July 2018, and the amended Money Laundering and Terrorist Financing (Prevention) Act (the Wwft) applies from that date. The Implementation decree Wwft 2018 and the amended Implementing regulation Wwft also came into force on 25 July 2018.
As a result of the adoption of the Fifth Anti-Money Laundering Directive, the legislative process which had been started in the Netherlands for the establishment of the local UBO register has been put on hold. The amended draft bill for the Dutch act on the registration of UBOs of companies and other entities established in the Netherlands is currently expected to be submitted to the Dutch House of Representatives in the beginning of 2019. A separate legislative process will be launched for the introduction of a register containing information on the UBOs of trusts and similar legal constructions.