Luxembourg Register of Beneficial Owners Has Arrived

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A New Law1 establishes the Luxembourg Register of Beneficial Owners (Registre des Bénéficiaires Effectifs, or RBE), requiring all entities that are registered with the Luxembourg trade and companies register (Registre de Commerce et des Sociétés, or RCS) – including investment funds – to disclose, and regularly update, information as to their beneficial owners.

By adopting this measure, Luxembourg is complying with the requirements of the 4th AML Directive2 (meant to be transposed in all EU Member States' local legislation by June 2017), while also complying with obligations to be imposed by the 5th AML Directive3 to grant public access to such information.

What entities are covered?

The scope of the New Law is quite broad, and applies to all forms and types of entities.4 This encompasses companies and partnerships, whether or not regulated, including Luxembourg investment funds such as UCITS, Part II Funds, SIFs, SICARs, RAIFs and other types of AIFs.

The New Law also covers Luxembourg common funds (fonds communs de placement, or FCP), which were initially excluded, as well as Luxembourg branches of commercial or civil companies established in other jurisdictions.

Although the main obligations of the New Law are imposed on the Luxembourg entity and its management body (e.g., board of directors, or its general partner in the case of a partnership), the New Law also requires that: (i) beneficial owners provide the necessary information to allow the Luxembourg entity to satisfy its obligations under the New Law; and (ii) all Luxembourg professionals subject to the Luxembourg AML Law  (e.g., banks, financial sector professionals, notaries, lawyers) notify the RBE within 30 days if they determine that the information that was filed is incomplete or erroneous.

Who is a beneficial owner?

The New Law does not specify who is to be considered as a beneficial owner, but instead refers to the definition of beneficial owner (bénéficiaire effectif) in the Luxembourg AML Law.6

It may be expected that there will be extensive discussion of this topic in the coming months, and that different approaches (more or less conservative) will be taken with respect to a given situation – in particular, involving the investment funds industry. Queries may include:

  • What minimum percentage of indirect shareholding might be deemed to constitute beneficial ownership? Industry participants have already expressed different approaches, with some referring to a 10% threshold while others are comfortable with a 25% threshold.
  • In the case of an investment fund established as a partnership, would the beneficial owners of the general partner necessarily be considered as beneficial owners of the fund itself?
  • In the case of an umbrella fund, is the determination of beneficial ownership to be made at the level of the fund itself or per compartment/sub-fund?

What information must be filed?

The information to be filed with the RBE regarding a beneficial owner is extremely detailed, and includes the owner’s: full name; nationality; date and place of birth; residence or business address; national identification number; and the nature and extent of the interests held.

However, less stringent requirements apply to companies listed on a regulated market in Luxembourg, the EEA or another country with obligations similar to those imposed by the EU transparency rules. In such case, the company only needs to provide the name of the regulated market on which its shares are listed.

The reporting entity or its representative is required to electronically file the relevant information, and any amendments thereto, with the RBE within one month of the date when the entity becomes aware, or should have been aware, of the event triggering the filing obligation.

Who can access the RBE?

Under the New Law, the RBE may be accessed not only by certain national authorities (including the public prosecutor, Financial Intelligence Unit, tax authorities and the CSSF) but also by the public.7

In this regard, Luxembourg goes beyond the requirements of the 4th AML Directive and complies with the requirement of the 5th AML Directive to provide public access to the RBE (which in principle does not need to be implemented into EU Member States’ national legislation until January 2020).

While the relevant Luxembourg national authorities will have full access to all the information filed regarding beneficial owners, the address and national identification number of the beneficial owners will not be available to the public.

Access to information regarding the beneficial owner(s) of an entity within the scope of the New Law can be restricted, to national authorities, credit institutions, financial institutions, bailiffs and notaries, upon request from the entity or the beneficial owner(s) in certain circumstances.8

Timing to comply; sanctions

The New Law was published on 15 January 2019 and will enter into force on 1 March 2019. Entities in scope will have six months (i.e., until 31 August 2019) to comply with the New Law and file the necessary information regarding their beneficial owners with the RBE.

Criminal fines of EUR 1,250 to EUR 1,250,000 can be imposed on entities or beneficial owners that do not comply with their obligations under the New Law.

Footnotes

1) Luxembourg law dated 13 January 2019 establishing a register of beneficial owners. The New Law enacts the bill of law n°7217 dated 5 December 2017.

2) Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering and terrorist financing.

3) Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018 amending Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering and terrorist financing.

4) Article 1 (2) to (15) of the Luxembourg law dated 19 December 2002 on the register of commerce and companies and the accounting and annual accounts of undertakings.

5) Luxembourg law dated 12 November 2004 on the fight against money laundering and terrorist financing, as amended.

6) Article 1(7) of the Luxembourg AML Law provides:

“Beneficial owner” shall, in accordance with this law, mean any natural person(s) who ultimately owns or controls the customer or any natural person(s) on whose behalf a transaction or activity is being conducted. The concept of beneficial owner shall include at least:

(a) in the case of corporate entities: (i) any natural person 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 European 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 customer 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 customer 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; (ii) 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), any natural person who holds the position of senior dirigeant (manager);

(b) in the case of fiducies and trusts: (i) the settlor; (ii) any fiduciaire or trustee; (iii) the protector, if any; (iv) the beneficiaries, or where the individuals benefiting from the legal arrangement or entity have yet to be determined, the class of persons in whose main interest the legal arrangement or entity is set up or operates; (v) any other natural person exercising ultimate control over the fiducie or trust by means of direct or indirect ownership or by other means;

(c) in the case of legal entities such as foundations, and legal arrangements similar to trusts, any natural person holding equivalent or similar positions to those referred to in point (b).

7) Such information may be accessed electronically on the website of the RCS, which will upon request also issue paper and electronic certificates including the relevant information.

8) These circumstances include where public access to the information would expose the beneficial owner to a disproportionate risk, or a risk of fraud, kidnapping, blackmail, extortion, harassment, violence or intimidation, or when the beneficial owner is minor or incompetent.

 

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