EU wide implementation UBO register completed?

23/12/19

By 10 January 2020, the public UBO register should be implemented in all EU/EEA countries. The Dutch Minister has stated that, according to the European Commission, the implementation is not implemented correctly in any of the EU Member States. The Commission is entering into dialogue with all Member States on this matter.

This report also includes an overview of the implementation status of the UBO register in 17 EU/EEA countries. This overview is based on a study carried out by PwC into the implementation of the UBO register in these countries.

Combating terrorism financing and money laundering is an major global challenge and may require far-reaching measures. Among other things, a public registration of ultimate beneficial owners (UBOs) is used for this purpose, so that it becomes visible - not only for competent authorities and supervisors but for everyone - who the private individuals behind entities are. The question of how this relates to the privacy of those being registered has largely been overlooked in the process of creating this registration obligation in the EU Parliament. The required assessment of whether the infringement of the right to privacy is justified was not carried out adequately.

Status implementation UBO-register in EU

The Dutch Minister of Finance stated in the Lower House of Parliament that, according to the European Commission, the implementation in the EU Member States is not yet complete: "The good news is that all Member States have now completed the implementation, but the European Commission is in conversation with all Member States, mind you, because it does not believe that any Member State has fully implemented the directive". Apparently there would be an implementation deficiency in each Member State. According to the PwC study, four countries currently have a private register that has yet to be made public. These are Austria, France, Gibraltar and Malta.

Striking results PwC study

The PwC survey produced a number of other striking results.

First of all, the percentages for qualifying interest to qualify as a UBO vary. The directive prescribes a threshold of 'more than 25 percent', but six of the Member States surveyed opt for a percentage of '25 or more'. The subtle difference between these two thresholds lies in the natural person who has an interest of exactly 25 percent. Austria, Cyprus, Finland, Malta, Norway and Portugal use the broader qualification of '25 percent or more'. Spain uses a percentage of more than 25 percent for companies, but 25 percent or more for foundations and associations. In Finland, there are calls to even lower the threshold of qualifying interest to ten percent.

Some countries do not limit the obligation to register as a UBO solely to legal entities established within their territory or to legal arrangements governed by national law. These are Austria, Luxembourg, Portugal, Spain and Sweden. For the UBO registration requirement, these Member States follow the place of establishment of the entity.

The Directive does not allow for an exception to the obligation to register as a UBO, apart from listed entities and their 100 percent shareholdings because they already meet other registration requirements. However, some Member States have included exceptions, such as Portugal for for public bodies, international public organisations and associations of owners. Other countries that have included exceptions are Austria, Finland, France, Ireland, Malta, Nederlands, Poland, Spain and Sweden. Initially, for privacy reasons, the Netherlands had also made an exception for UBO registration of churches, but that exception was recently deleted by an amendment.

In four of the countries surveyed, the UBO data of minors is automatically blocked: Austria, Belgium, Finland and Ireland. In the other countries this is only possible on request. Sweden does not provide any possibility at all to block the UBO data of a minor.

Finally, in some Member States there is no obligation to register at least one UBO: Malta, Germany, Norway and Sweden. In the absence of a genuine UBO, there is no obligation to register the pseudo UBO (senior management).

By March 2021, all UBO registers in EU/EEA countries must be interconnected. It is precisely the differences in implementation described above that will cause the necessary implementation problems.

What does this mean for Dutch entities?

If you 'ultimately' have an interest of more than 25% in a Dutch entity such as a BV, you must be registered as a UBO in the Durch UBO register. Ultimately' means that it does not matter whether you are a direct shareholder or whether you hold the interest through other entities such as a holding company. It also makes no difference whether it concerns ownership or sole control, both interests count and both interests can lead to a designation as a UBO. If no UBO can be designated on the basis of ownership or control, then someone of the senior management must be registered as a pseudo UBO.

The UBO registration is partly public: your name, month and year of birth, place of residence, nationality and the nature and scope of your interest will become publicly available. If you are a UBO of an entity that was already registered in the Trade Register at the time the register came into force, you still have 18 months from that moment to be registered. If you are a UBO of a new entity established after the entry into force, you must be registered as a UBO within one week of its establishment.

It is still unclear when exactly this registration obligation will enter into force, because the Dutch Senate has yet to approve the Dutch Implementation Act. On 28 January 2020, this House will continue to deal with the matter, which is why the Dutch UBO register is expected to come into effect in March 2020.

The mandatory UBO register for trusts and similar legal arrangements - in which the UBOs of, among others, the collective investment funds (fondsen voor gemene rekening’) will be registered - should be operational in all Member States from 10 March 2020 on the basis of the EU Directive. In the Netherlands, however, it has been announced that the bill will not be introduced until July 2020.

The state of implementation of UBO registration in 17 EU/EEA countries can be found in this overview.