There is less than a month until the expiry of the deadline for reporting the beneficial owner/s to the Companies' Register, and the Ministry of Economy and Finance, the Bank of Italy and the Italian Financial Intelligence Unit have now provided a series of clarifications in the form of joint responses to the questions frequently raised by the market (available only in Italian on the Bank of Italy and Ministry of Economy and Finance websites).
Among the clarifications that have been provided by the Authorities, a particular attention must be put on the relevant threshold for determining the indirect ownership to identify the beneficial owner in the – frequent – cases where the direct shareholders of the company are corporate entities.
As highlighted in our previous newsletter of 16 November 2023, it was not clear whether, for the purpose of identifying the beneficial owner (after having identified the shareholders owning more than 25% capital in the company), the criterion to be applied to determine the indirect ownership should be the “control” criterion (i.e. more than 50% of the shares or voting rights that can be exercised at the shareholders' meeting), or the “more than 25%” interest throughout the entire participation chain.
The Italian market practice (as also observed by Assonime – the Association of Italian joint stock companies) has precautionary been applying the “more than 25%” criterion throughout the entire participation chain, also based on the answers provided by the Bank of Italy to the FAQs on the AML Provisions prior to the amendments of 2019, and also in line with the tendency shown by the EU legislator, as evidenced in Whereas 65 of the proposal for a EU Regulation on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing (COM(2021) 420 – final), submitted by the EU Commission on 20.7.2021, stating that “control through ownership interest of 25% plus one of the shares or voting rights or other ownership interest should be assessed on every level of ownership, meaning that this threshold should apply to every link in the ownership structure and that every link in the ownership structure and the combination of them should be properly examined.”
The answer that has now been provided by the Authorities on this point is clear: "in the case of indirect ownership, through subsidiaries, the threshold of 25% +1 must be considered exclusively in relation to the corporate capital of the client company, and then it is necessary to go up throughout the ownership chain to identify the natural person or persons exercising control pursuant to Art. 2359, paragraph 1, of the Civil Code", i.e., "the companies in which another company holds the majority of the votes that can be exercised at the ordinary shareholders' meeting" (Art. 2359 of the Civil Code).
Such approach simplifies substantially the assessment for the identification of the beneficial owner, especially in groups having a particularly complex structure, as the analysis shall be limited only to those entities - other than direct shareholders - holding more than 50% ownership interests (or voting rights).
Should the above-mentioned EU Regulation eventually be adopted without further amendments, there might be a risk of inconsistencies between the two different approaches, especially in case of groups with companies dislocated in different jurisdictions, where there might be divergent market practices.
Meanwhile, companies and market operators shall comply only with the new guidance provided by the above-mentioned Authorities, in view of the upcoming deadline for the reporting of the beneficial owner, i.e. 11 December 2023, although a possible deferral to 6 February 2024 is under discussion, following to the submission of an amendment to the so-called draft Decree “Decreto Anticipi”, currently under examination in the Italian Senate. |
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Given the complexity and relevance of the subject matter, CMS provides clients with a beneficial owner verification (and reporting) service through its dedicated helpdesk, composed of professionals specialised in the AML field.
If you need support in identifying your entity's beneficial owner, please contact us at the helpdesktitolareeffettivo@cms-aacs.com
