Following the adoption of the fourth EU anti-money laundering directive (2015/849/EC, the “Directive”) which aim is to prevent money laundering and terrorism financing by means of, inter alia, introducing central registers identifying the ultimate beneficial owner(s) (“UBOs”) for certain Luxembourg entities, two draft bills of law were introduced on 6 December 2017 and presented to the Luxembourg Chamber of Deputies. Both bills are presently undergoing their parliamentary journey, expected to be implemented in the course of 2018.
The draft bills, introduced under numbers 7216 and 7217, aim at introducing respectively a register for trusts, which would only become available for Luxembourg domestic authorities, and a register for corporate and legal entities. This newsletter focusses only on the draft bill 7217 (the “Draft Bill”).
The main takeaways of the Draft Bill
The Draft Bill proposes the implementation of a register which keeps information about the identity of the UBO(s) of, inter alia, Luxembourg registered entities (e.g. private limited liability company, public limited company, corporate partnership limited by shares, general partnership, common limited partnership etc.). An exception is made for companies listed on a regulated market in Luxembourg, in a country that is part of the EEA or in a country that imposes equivalent international standards.
This information needs to be collected, maintained (for a period up to five years), and timely updated by all Luxembourg legal entities concerned. The information is to be reported to and filed with the “Groupement d’intérêts économique du Registre de commerce et des sociétés” (“RCSL”), failing which such entities (or their authorized representatives) may face a criminal fine of up to Euro 1,250,000.
The information to be provided to the RCSL includes any of the following items of (each of) the UBO(s):
- Full name, date and place of birth;
- Nationality(ies) and country of residence;
- Private or professional address;
- National or foreign identification number (e.g. ID card/passport number); and
- Information (nature and extent) of the beneficial interest held in the relevant corporate/other legal entities.
The above information (timely updated, where required) is to be kept in the register and will be kept therein during 5 years after the dissolution of the relevant entity.
While the RCSL is considered as processor of the data (in the meaning of the law of 2 August 2002 regarding personal data protection) as being in charge of registering, backing-up, managing and making the data available, the Minister of Justice is controller of the data since he is responsible for determining the purposes and means of processing data.
To determine who should be considered the UBO(s), the Draft Bill refers to the definition given in the Luxembourg law of 12 November 2004 against money laundering and terrorism financing, i.e. any natural person who ultimately owns a sufficient percentage of shares or voting rights in the legal entity through direct or indirect ownership or has formal or effective control over such legal entity (i.e. shareholding or ownership of more than 25%). If no such person exists, then the person(s) holding the position of senior manager of the relevant entity is considered to fall in the scope of the UBO definition and should be recorded accordingly.
According to the Draft Bill, the information contained therein shall be accessible for:
(i) National authorities (individually listed in the Draft Bill) competent in the fight against money-laundering (e.g. the judicial administration, the regulator of the financial sector, ‘CSSF’ and the tax authorities) shall have full access to the information;
(ii) Self-regulatory bodies which need access to the information in the scope of their mission of anti-money laundering and counter terrorism (e.g. Chamber of notaries, the Luxembourg Bar, Institute of auditors etc.) as well as certain professionals in order to comply with their KYC requirements. These persons will not have access to the professional/private address and national/identification number of the UBO(s).
(iii) Other resident persons or organizations provided such person/organization has a ‘legitimate interest’ in the UBO information. Any such access remains a partial access which prevents such person/organization to gain access to the professional/private address, date of birth, place of birth or national/identification number of the UBO.
Such ‘legitimate interest’ is to be motivated through a request to be made to the RCSL, which the RCSL shall transmit to a newly created commission de coordination, which shall validate and decide on the legitimacy of the request. In case the commission de coordination decides positively on such request, the RCSL provides the requesting person an extract containing certain limited (per above) information on the UBO(s) within a period between 5 and 15 working days from the date of the positive decision of the commission de coordination.
The Draft Bill does not specify what constitutes ‘legitimate interest’.
Only in very exceptional situations (determined on a case-by-case basis) and subject to a motivated request to be addressed by the concerned entity to the RCSL, access to information may be restricted to national authorities only (e.g. in case of risk for kidnapping, blackmail, violence or where the UBO is a minor). Upon the receipt of such request, the RCSL will transmit it to the commission de coordination which shall render its decision.
The Draft Bill stipulates that the information will need to be filed with the RCSL within a month following the event making such filing required.
However, the Draft Bill contains as a transitory period for entities already existing at the time the law enters into force. Such entities will have to comply with the rules and ensure the proper registration of the required information within a period of six months following the entry into force of the law.
Based on the current version of the Draft Bill, the law shall enter into force on the first day of the month following its publication in the Luxembourg Mémorial.
The Draft Bill presently follows the Luxembourg legislative process and we expect publication in the Luxembourg Mémorial in the course of next year.
Tiberghien Luxembourg is committed to monitor the progress of the Draft Bill in the legislative process closely and provide updates where appropriate. For any questions, please contact your trusted advisor at Tiberghien Luxembourg or contact any of the authors of this publication.
Michiel Boeren, counsel Tiberghien