Tough new AML regulations in force

Establishment of the register of Ultimate Beneficial Owners for Cyprus companies and other legal entities

By Eleni Louka

On 20 May 2015, the European Council issued the Directive (EU) 2015/849 (the fourth AML directive). This anti-money laundering directive required member states to establish a register of the ultimate beneficial owners of obliged legal entities within their respective jurisdictions.

In 2018, the EU council issued the Directive (EU) 2018/843 (the fifth AML directive). This obliged member states to launch publicly accessible registers containing details as to the beneficial ownership of companies and other legal entities such as trusts.

The fifth directive was transposed into national legislation via the enforcement of the Prevention and Suppression of Money Laundering and Terrorist Financing Law of 2007 to 2021 on February 23, 2021. The law provides for the establishment and maintenance of a publicly available national central register of ultimate beneficial owners (UBOs) for companies and other legal entities (the “National Central Register of UBOs”), containing detailed information regarding the beneficial ownership and control of the obliged legal entities falling within the scope of the law.

 

Definition of Ultimate Beneficial Owners

 

According to section 2(1) of the law, a UBO is defined as any natural person or persons who ultimately own or control a company or other legal entity and/or the natural person or persons on whose behalf transactions and/or activities are being conducted and include at least:

(a) in the case of corporate entities:

• the natural person or persons who ultimately own or control a legal entity through direct or indirect ownership of a sufficient percentage of the shares or voting rights or ownership interest in that entity, including through bearer shareholdings, or through control via other means, other than a company listed on a regulated market which is subjected to disclosure requirements compatible with the EU law or subject to equivalent international standards which ensure adequate transparency of ownership information.
• It is noted that a shareholding of 25 per cent plus one share or an ownership interest of more than 25 per cent in the corporate entity held by a natural person shall be an indication of direct ownership. A shareholding of 25 per cent plus one share or an ownership interest of more than 25 per cent in the customer entity held by another corporate entity which is under the control of a natural person(s), or by multiple other corporate entities, which are under the control of the same natural person or persons, shall be an indication of indirect ownership.
• if, after having exhausted all possible means and as long as there are no grounds for suspicion, no person under the first point (above) is identified, or if there is any doubt that the person or persons identified are the beneficial owner(s), the natural person(s) who hold the position of senior managing official(s),

It is noted that the obliged entities are under an obligation to maintain records of the actions taken to identify the beneficial owners.

(b) in the case of trusts:

• the trustee(s);
• the settlor;
• the beneficiaries. If the persons benefiting from the legal arrangement have not been determined yet, the class of persons in whose interest the legal arrangement or entity is set up or operates;
• the protector, if any;
• any other natural person exercising ultimate control over the trust through direct or indirect ownership or via other means.

(c) in the case of other legal entities including foundations and other legal arrangements like trusts, the natural person or persons holding equivalent or similar positions to those referred to in point (b) above.

 

Obliged entities

The directive issued by the Registrar of Companies and Intellectual Property regarding the National Central Register of Ultimate Beneficial Owners (UBOs) of Companies and other Legal Entities provides that the details and/or information of the beneficial owners of the obliged legal entities must be submitted electronically.

The obliged entities for which the details and/or information pertaining to their beneficial ownership must be submitted are the following:

• Companies incorporated and established under the Companies Law Cap.113
• European Public limited liability companies

 

It is noted that the aforementioned directive does not apply to the entities mentioned below:

• Companies listed on regulated markets that are subjected to disclosure requirements consistent with EU law or equivalent international standards and which are intended to ensure sufficient transparency pertaining to the beneficial ownership details;
• Companies whose directors submitted an application for strike-off pursuant to Article 327 (2A) (a) of the Companies Law Cap. 113, prior to 12/03/2021;
• Companies whose liquidation has been enacted prior to 12/03/2021.

 

Information to be filed with the National Central Register of UBOs

The following information and details pertaining to each natural person that is a UBO of a corporate entity must be filed with the National Central Register of UBOs:

1. Name, surname, date of birth, nationality and residential address;
2. Identification document number indicating the type of document and the country of issuance thereof (passport or identity card);
3. Date on which the natural person was entered in the National Central UBO Register as a UBO;
4. Nature and extent of the beneficial interest held directly or indirectly by the UBO, including through percentage of shares, voting rights, or the nature and extent of the significant influence or control with other means exercised by each controlling person;
5. Date on there were changes in the particulars of the natural person or the date on which the natural person ceased to be a UBO.

Currently, where the structure of a legal entity registered in the Republic of Cyprus, leads to trust/s, foundation/s, other similar legal arrangements or listed companies, the following information and/or details must be filed:

1. Name of trust(s), foundation(s), listed companies or other similar legal arrangements;
2. Country of jurisdiction;
3. Registration number (if any);
4. Business address (not applicable to trusts);
5. Nature and extent of the beneficial interest held directly or indirectly by each beneficial owner, including through percentage of shares, voting rights or the nature and extent of the significant influence or control with other means exercised by each controlling person;
6. Date on which the trust, foundation, listed company or other similar legal arrangement was entered in the register as UBO;
7. Date on which there were changes in the particulars of a trust, foundation, listed company or other similar legal arrangement or the date on which it ceased to be a UBO.

If no physical person can be identified as the UBO based on the ownership structure and rights of the legal entity or where there is doubt that the person identified is the actual UBO thereof, the senior management official’s information and details shall be filed with the National Central Register of UBOs, stating whether the person is a director in the company or whether he/she holds any other position in the legal entity. In such cases, the nature and extent of the beneficial interest is not submitted on the system. The obligation and responsibility for the filing of information is on the legal entity and the officials thereof.

The electronic National Central Register of UBOs shall be accessible by the following authorities and persons:

• Competent supervisory authorities, the FIU, the Customs Department, the Tax Department and the police shall have quick and unlimited access without the payment of any fee;
• Obliged entities, during the conduct and application of due diligence and customer identification procedures, policies and measures, shall have access to the name, month and year of birth, nationality and country of residence of the UBO(s) as well as to the nature and extent of the beneficial interest held, following payment of a fee of €3.50, per entity;
• All members of the general public shall have access to the name, month and year of birth, nationality and country of residence of the UBO(s), as well as to the nature and extent of the beneficial interest held in the legal entity, following the payment of a fee of €3.50 per entity.

 

As of the date of establishment of the National Central Register of UBOs (12/03/2021) until the 31/07/2022, on which the electronic National Central Register of UBOs will become fully operative, access to the information and details of the UBOs will be granted only to competent supervisory authorities, the FIUs, the police, the Tax Department and the Customs Department, upon submitting a written request to the Registrar of Companies.

 

Timing of filings

Each and every obliged entity mentioned above shall proceed with the filing of the necessary information and details pertaining to the beneficial ownership thereof prior to the expiration of the interim solution period, which is extended until July 31, 2022.

 

In the event where there was a change of the details of the existing UBO(s) of an obliged entity or where the obliged entity decided to proceed with the change of its UBO(s), the entity and its officers are under an obligation to proceed with the filing of the details of the new UBO(s) with the National Central Register of UBOs within 14 days from the date such change occurred.

In regard to newly incorporated obliged legal entities that were registered after March 12, 2021, the company and its officers shall proceed with the filing of the necessary information and details pertaining to the beneficial ownership thereof within 30 days as of their date of incorporation.

 

Submission process

The filing of the necessary information and details pertaining to the beneficial ownership of obliged legal entities is possible via the Government Gateway Portal Ariadni in one of the following manners:

• by creating a corporate/partnership Ariadni profile, belonging to the legal entity itself (if not already registered);
• by submitting the necessary information and/or details pertaining to the beneficial ownership of the obliged legal entity via the Ariadni profile of an officer or partner (physical person) of the legal entity;
• by submitting the necessary information and/or details pertaining to the beneficial ownership of the obliged legal entity via the Ariadni profile of an officer or partner (legal person) of the legal entity.

 

Consequences of non-compliance

Strict and penalties and fines may be imposed on obliged legal entities and the officers thereof in cases of non-compliance with the provisions of the law, the AML directives and/or the directive issued by the Department of Registrar of Companies and Intellectual Property.

More specifically, both the obliged entity and each of its officers will be subject to a penalty in the amount of €200 and, in case the default continues, an additional amount of €100 will be imposed upon them for each additional day of delay with a cap penalty of €20,000.

It shall be noted that the aforementioned penalties and fines will apply post the expiration of the interim solution period, namely after July 31, 2022, as during the aforesaid interim solution period (grace period) no penalties and/or fines will be imposed upon obliged entities and their officers.