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Interesting developments in relation to the implementation of the register of beneficial owners in Luxembourg

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Pierre Schleimer

Partner

Luxembourg

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Thomas Berger

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Schmidt Carole
Carole Schmidt

PSL-Counsel

Luxembourg

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18 October 2018

​Since our e-alert of 23 July 20181, all bills pertaining to the transposition of the fourth anti-money laundering directive2 (the AMLD IV) have been adopted, except:

  • bill n°7216B implementing article 31 of the AMLD IV pertaining to the register of trusts; and
  • bill n°7217 implementing article 30 of the AMLD IV pertaining to the register of ultimate beneficial owners.3

Major changes to bill n°7217 have recently been published and it seems that the Luxembourg parliament is getting closer to a final version of the future law.

The aim of this e-alert is to highlight the amendments to bill n°7217 that will most significantly have an impact on directors of Luxembourg entities and their beneficial owners.
 

1. EXTENDED SCOPE OF THE REGISTER OF BENEFICIAL OWNERS

 
Previously, companies whose shares are admitted to trading on a regulated market (Listed Companies), fonds communs de placement and Luxembourg branches of foreign companies were all outside the scope of the bill.
 
All three have now been included in the list of registered entities falling within the scope of the bill (the Concerned Entities) and will therefore have to (i) obtain and hold information on their beneficial owners, (ii) file such information in the register of beneficial owners (now designated as the RBE), and (iii) grant access to their records to the Luxembourg national authorities and professionals within the meaning of the law of 12 November 2004 relating to the fight against money laundering and terrorist financing, as amended from time to time (e.g. credit institutions, lawyers and notaries) (the Professionals).
 
It should be noted that Listed Companies will only be required to file the name of the regulated market on which their securities are admitted to trading (i.e. they will not have to directly file information on their beneficial owners) with the register of beneficial owners.
 

2. PUBLIC ACCESS TO THE REGISTER OF BENEFICIAL OWNERS CONFIRMED

 
Except as set out in section 3 below, the new draft of the bill maintains the principle (in anticipation of the transposition of the fifth anti-money laundering directive4 (the AMLD V)) that access to the first name(s), last name(s), nationality(ies), date of birth, place of birth, country of residence of the beneficial owners as well the nature and the extent of the interests held by them should be granted to everyone.
 
The search criteria will be determined by a grand-ducal regulation.
 

3. NEW RIGHTS IN FAVOUR OF THE BENEFICIAL OWNERS

 
Also in anticipation of the transposition of the AMLD V, the previous draft of the bill provided that beneficial owners must at their own initiative provide all information about themselves to the relevant Concerned Entity. This provision has been maintained in the latest version of the bill.
 
In addition to the above obligation, the bill now recognises rights in favour of the beneficial owners.
 
They have the right to appeal any decision pertaining to the filing and registration of information with the register of beneficial owners.
 
They also have the right to request that their identity not be publicly disclosed in the register of beneficial owners if they would be exposed to a disproportionate risk or a risk of fraud, kidnapping, blackmail, extortion, harassment, violence or intimidation or if they are a minor or otherwise incapable.
 

4. NEW RULES REGARDING THE LIMITATION OF ACCESS

 
A new process has been laid down to allow both the Concerned Entity and the relevant beneficial owner to, in exceptional circumstances (please see section 3 above), request that access to the beneficial owner’s identity be restricted.
 
The application must be made to the manager of the register of beneficial owners. Once the application has been filed, the manager will provisionally restrict access to the information until it notifies its decision or, if the application is rejected, until 15 days after such decision.
 
If the application is rejected and appeal is made, the restriction will be maintained until a final decision has been rendered.
 
If the application is accepted, the restriction will be maintained for a maximum period of three years. A new application may be made to renew the restriction. A mention of this restricted access is inserted in the register of beneficial owners.
 
Any interested party may challenge the manager’s decision in court within 15 days after the decision has been published in the register of beneficial owners.
 
While the access is restricted, only national authorities, credit institutions and financial institutions as well as bailiffs and notaries acting in their capacity as public officers will be authorised to consult the register in relation to the relevant beneficial owner.
 

5. CONSULTATIONS BY NATIONAL AUTHORITIES TO REMAIN UNDISCLOSED

 
The bill now specifically provides that no information pertaining to the consultation of the register of beneficial owners by national authorities may be disclosed to the Concerned Entities or beneficial owners.
 

6. CLARIFIED RULES ON RECORD KEEPING

 
The bill provides that the register of beneficial owners will keep all information pertaining to filings (including information on the beneficial owners) for a period of five years after the Concerned Entity has been struck off from the Luxembourg trade and companies register. Underlying supporting documents filed with the register will however be kept for five years only.
 
The internal records to be kept by the Concerned Entities will also include all underlying supporting documents. All such internal records will have to be kept for five years after the Concerned Entity has been struck off from the trade and companies register at such place as designated by the Concerned Entity.
 

7. CLARIFIED DEADLINES

 
Certain deadlines have been clarified in the new draft of the bill.
 
Any change pertaining to the information filed or to be filed with the register of beneficial owners must be communicated within one month after the Concerned Entity became aware of or should have known that the change had occurred. Previously, it was provided that filing had to be made within one month of the change, regardless of whether the Concerned Entity actually had or should have had knowledge of it.
 
Concerned Entities must provide information to the national authorities within three days of their request. The same applies to requests made by Professionals, provided always that the access to the information is not restricted in respect of the relevant Professional (please see section 3 above) and that they act within the scope of their client due diligence obligations.
 

8. CLARIFIED PENALTIES

 
Failure by the Concerned Entities and the beneficial owners to comply with their obligations as laid down in the bill may still lead to criminal penalties ranging from EUR1,250 to EUR1,250,000.
 
In respect of Concerned Entities, however, it is now specified that such criminal penalties will apply to them only while the previous draft of the bill also incriminated their representative. This is a helpful amendment as the previous formulation was too vague. It should, however, be noted that directors acting on behalf of the Concerned Entity may still be considered as accomplices of the offence.
 
1 E-alert of 23 July 2018
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 or terrorist financing.
3 Please note that the following bills have been adopted:
- bill n° 7208 (now referred to as the law of 1 August 2018) implementing directive 2016/2258 pursuant to which national tax authorities shall be granted access to the mechanisms, procedures, documents and information referred to in articles 13 and 40 of the AMLD IV; and
- bill n° 7216A (now referred to as the law of 10 August 2018) relating to the information to be obtained and maintained by the fiduciary agents and relating to the transposition of Article 31 of the AMLD IV.
4 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 or terrorist financing, and amending Directives 2009/138/EC and 2013/36/EU. This directive entered into force on 9 July 2018.
 

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