17 December 2014

EU Reaches Agreement on Beneficial Ownership, Advancing Fourth AML Directive

Factions within the European Union reached a compromise Tuesday on the terms of the long-awaited Fourth Anti-Money Laundering Directive, including provisions to create central registers on the ultimate beneficial owners of corporate and other legal entities, as well as trusts in every member state.  

Access to the registers will be limited to “competent authorities,” and their financial intelligence units (without any restriction), “obliged entities” (such as banks conducting their customer due diligence duties), and to members of the public or organizations who can demonstrate a “legitimate interest”, such as investigative journalists and other concerned citizens, a brief European Parliament (EP) statement issued Wednesday explained. 

Under rules agreed to following contentious negotiations by representatives of the EP and European Council, registers will contain beneficial owners’ names, month and year of birth, nationality, residency and ownership details. Access may be subject to online registration of the person and to the payment of a fee to cover administrative costs, the EP explained.

On Wednesday the EP explained that the deal still needs to be endorsed by EU member states’ ambassadors (COREPER) and by Parliament’s Economic and Monetary Affairs and Civil Liberties, Justice and Home Affairs committees, before being put to a vote by the full Parliament next year.

While the “clear compromise” will placate the U.K. to some extent, until it is clear what sort of trusts are affected, concerns will remain that the details of trust beneficiaries will need to be disclosed for no apparent legitimate purpose, according to Andrew Goldstone, Partner and Head of Tax, Wealth and Planning at Mishcon de Reya.

The new plan for companies announced gives rise to questions such as “What will be considered a legitimate interest? Who will be responsible for delivering the information to the central register?  Will the company and the beneficial owners both be caught or only the beneficial owners?” said Kate Higgins, Legal Director, Corporate Department at Mishcon de Reya

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