By Simon O’ Connor, 7th July 2015
European companies will soon have to disclose information regarding who owns or controls them. The Fourth Anti-Money laundering Directive which was published in early June and came into effect on the 26th of June, 2015 requires all European member states to incorporate the directive into their own national laws within 2 years. All companies who are subject to the directive must comply with it by the 26th of June, 2017.
The directive implements the 2012 propositions from the Financial Action Task Force (FATF), an international body that sets standards for anti-money laundering. One of the main features of the directive is that it instructs EU member states to format registers that will record the beneficial ownership of businesses. Under the directive, a beneficial owner is a human being who owns or controls a business by having a stake of 25% or more in the business. The purpose behind revealing beneficial ownership is to prevent financial crime and to avoid having hidden beneficiaries. By requiring companies to disclose such information it will make it difficult to hide money laundering and tax evasion.
The registries may not be fully public for all EU member states. Under the new Directive, a member state only needs to provide access to its law enforcements authorities, obligated entities such as financial institutions who may require the information to conduct due diligence. A number of EU governments have already announced that they plan to have a publically accessible register for company ownership.
Financial firms will soon be required to take a risk based approach to their customer due diligence procedure. If they are found to be involved in illicit transactions, they should expect to come under scrutiny to identify the beneficial owners of all involved and they should also expect to be met with swift and significant action from prosecutors and regulators if requirements are failed to be met. They must ensure that they take full advantage of the beneficial ownership registries to avoid the prosecution from regulators for failing to take appropriate steps to prevent financial crime.Contact US