Virtually all financial and legal institutions, such as law firms, estate agencies and banks, must ensure that the services the provide are not misused to launder money or conceal that money has a criminal origin. An important and effective instrument in this obligation is the Dutch Act on the Prevention of Money Laundering and the Financing of Terrorism [Wet ter voorkoming van witwassen en financiering van terrorisme] (Wwft).
Based on the Wwft, special attention must be devoted to unusual transaction patterns and transactions that have an increased risk of money laundering or terrorism financing. For example, the Wwft imposes obligations on service providers, such as the requirement to investigate their clients’ identity and the origin of funds and also to be on the alert for money laundering. In short, compliance with the Wwft contributes to a stable and reliable financial system. The Wwft originates in European legislation which obliges each EU Member State to incorporate it into their national legislation.
Who is the UBO?
One important aspect of the Wwft – with regard to determining the risk caused by a service – is verifying the identity of the Ultimate Beneficial Owner (UBO). Under the Wwft, a UBO is a natural person who has one or more of the following characteristics:
- a direct or indirect interest of more than 25 per cent in the client’s capital
- more than 25 per cent of the voting rights at the client’s general meeting
- actual control in a client
- beneficiary of at least 25 per cent of the assets of a client or trust, or
- special control over at least 25 per cent of a client’s assets.
This definition often results in the inability to identify a UBO.
Mandatory UBO register
The fourth European anti-money laundering Directive was implemented in 2015, and this Directive must be incorporated into the Dutch Wwft no later than June 2017.
Part of the Directive is the ‘UBO Register’, which must be implemented and maintained for each Member State. The details of the register are still to be worked out, but it is clear that it will be maintained by the Chamber of Commerce [Kamer van Koophandel] (KvK). It is also clear that the obligation to be listed in the UBO Register will apply to all legal entities [rechtspersonen], partnership firms [personenvennootschappen] or other entities. Listed companies will be exempt.
Entities will be required to register their own UBO(s) with the KvK. Institutions that are required to consult the register (such as banks, law firms, and notarial firms) will have to notify the KvK of any discrepancies or errors they observe. Furthermore, Dutch law must establish when entities which are obliged to register can be held liable for their failure to comply with this obligation.
What information will be in the UBO Register?
- month and year of birth
- country of residence
- nature and scope of the interest held
Information such as these individuals’ addresses and Dutch social security numbers will only be available to specific designated agencies.
Who will have access to this information?
- unrestricted: authorities such as the Dutch Central Bank, the AFM, and the Financial Intelligence Unit – the Netherlands [Financiële inlichtingen eenheid] (FIU) and their counterparts in other EU Member States, and
- in the context of a client audit: mandated reporting institutions such as law firms, notarial firms, estate agencies, and banks
- all persons and organisations with a legitimate interest
Expanded definition of UBO
Finally, it is worth noting that, under the new legislation, each entity will have to include at least one UBO in the register. Because of this, the five criteria set forth above have been expanded such that, from now on, a UBO will be a natural person who also has one or more of the following characteristics:
- authority to dismiss one or more managing directors
- holds a higher staff-management position
Overview implementation UBO-register EU
We hereby present the first part of our research on the status of implementation of UBO-registers within the EU. The schedule shows that most countries are still in the early stages of implementing most of the fourth anti-money laundering directive. Because of the complexity of establishing a fully working UBO-register, we see a tendency that countries choose to implement legislation on this matter in a separate bill. The following information is set out in the schedule:
- relevant information with hyperlinks to the draft law or any other document (if available);
- persons with access to the UBO-registers;
- qualifying circumstances to shield certain information on persons recorded in the UBO-register;
- body responsible for keeping the UBO-register;
- (likely) date of entry in to force.
The fourth Directive is still hot of the press, but new EU legislation is already in the making. In December, the European Commission released an intended amendment of the fourth anti money-laundering directive; ''the fifth anti-money laundering directive''. The European Commission proposed to make the UBO-register publicly accessible so as to improve transparency about the ownership of companies and trusts. The European Commission also proposed to publish certain information on ultimate beneficial owners of entities with a profit-motive. The registers will also be interconnected to facilitate cooperation between EU member states. The European Commission advised member states to take the proposed amendment into account when implementing the fourth anti-money laundering directive.