4th and 5th AML Directives - Luxembourg law of 13 January 2019 implementing a register of beneficial owners

24/01/19

In brief

The EU directive on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing "4th AML directive", published in May 2015, provides for the creation of a register of beneficial owners ("BO register") in each Member State. The 5th AML directive, published in May 2018, opens the access to this information to the public at large as said directive has removed the need to demonstrate a legitimate interest to access to the information filed with the BO register.

On 6 December 2017, the Luxembourg Government filed Draft Bill n°7217 to introduce a BO register in compliance with the 4th AML directive in Luxembourg law. The initial Draft Bill was amended in July 2018 to comply with the 5th AML directive, which opens the access to the register to the public at large. The Law implementing a register of beneficial owner (the "Law") was published on 15 January 2019 and will enter into force as of 1 March 2019.

 

Which entities need to disclose?

The registration obligation will apply to all legal forms registered in the trade register, including mutual funds, with the exception of listed companies on equivalent stock exchanges that will only have to disclose the market on which they are listed. There will be a separate register for trusts and similar legal arrangements with their specific BO definition (this provision is still under discussion at Parliament level, cf. Draft Bill n°7216).

Which information needs to be disclosed?

The directors or other persons who may represent the entity must gather and store at the head office accurate and up to date information on the BOs and ensure that at least one BO is registered. After the entry into force of the BO register, existing entities will have six months to identify and register their BOs. For new entities, a registration period of one month after the establishment applies, likewise in case of modification.

The BO is a natural person who ultimately owns or controls a legal entity. This can be through the direct or indirect ownership of more than 25% of the shares or voting rights, or when the natural person can otherwise exercise authority over the management. Where after having exhausted all possible means and provided there is no grounds for suspicion it is not possible to identify a BO the Senior managers are to be considered as BO.

The BO register contains first and last names, date and place of birth, nationality, country of residence, exact private or business address details, the national identification number and the nature and extent of the interest of the BO. The BO register will be accessible to the public at large (except address and national identification number). A limitation of access to public information may be granted in exceptional circumstances (e.g. risk of fraud, kidnapping, blackmail, extortion, juvenile or legally disabled BO, etc.). The law does not give any indication on how those circumstances should be justified.

Entities arguing exceptional circumstances should submit a substantiated request to the BO register for stopping the public disclosure. From that moment on, access to the BO information would be blocked for a 3-year period (maximum), period which could be renewed through a new request. The blocking will be lifted if the request is not granted. Entities and their BO can challenge the decision of the BO register in court within 15 days.

According to the law, personal data must be processed in accordance with European data protection legislation, but it is not yet clear how this relates to the General Data Protection Regulation and the case law of the Court of Justice of the EU in this area. The information are kept for 5 years after the date of deletion from the Commercial and Corporate Register following the dissolution of the entity.

The BO register will be managed by the Luxembourg Business Register. Upcoming Grand Ducal Regulation will detail procedures, terms and conditions, costs and required documentation for registering the BO.

Fines

Failure to comply with the registration obligation will incur a fine of between EUR 1 250 and 1 250 000 imputable to the entity or the BO himself if he has failed to provide the requested information.

Contact us

Michael Weis

Partner, Forensic Services and Financial Crime Leader, PwC Luxembourg

Tel: +352 49 48 48 4153

Roxane Haas

Partner, Banking Leader, PwC Luxembourg

Tel: +352 49 48 48 2451

Birgit Goldak

AML Services Partner

Tel: +352 49 48 48 5687

Alain Meunier

Partner, Private Wealth Services Leader, PwC Luxembourg

Tel: +352 49 48 48 3314