On 26 June, the Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing came into force.
The Directive is focusing on the effectiveness of internal controls to combat money laundering obliging businesses falling under its jurisdiction to review their current systems. The Directive also widens the definition of obliged entities and reduces threshold for qualified cash transactions for persons trading in goods.The most anticipated novelty is the introduction of a central UBO-register, i.e. a public register which identifies the ultimate beneficial owners of companies and trusts
In relation to Slovenia, the draft Bill implementing the Directive to Slovenian legislation was already published for public comments and it planned to be adopted by 1 April 2016.
The Directive (EU) 2015/849 is building on the existing requirements of the preceding, the so-called Third Anti-Money Laundering Directive and putting a special focus on the effectiveness of internal controls to combat money laundering. Consequently, businesses falling under the jurisdiction of the Directive (obliged persons) will have to review their current anti-money laundering systems, perform analysis of money laundering and terrorism financing risks and establish the specific measures to reduce or mitigate the risks identified.
The Directive also widens the definition of obliged entities to providers of gambling services (subject to exemptions where low money laundering risk is proven), estate agents involved in the letting of real estate and, in addition, provides for an extension of the scope of anti-money laundering requirements by reducing the threshold for qualified cash transactions for persons trading in goods from EUR 15,000 to EUR 10,000.
Additionally, obliged persons will need to, where appropriate based on size and nature of the business, appoint a compliance officer at management level. For cases of serious, repetitive or systematic non-compliance with key requirements, the Directive prescribes an increase of pecuniary sanctions to include a maximum of at least twice the amount of the benefit derived from the breach or at least €1m. The prescribed maximum administrative fine for banks and financial services providers is even higher at no less than €5m or 10 percent of the total annual turnover according to the latest available accounts.
However, by far the most anticipated novelty is an obligation for EU member states to introduce a central UBO-register, i.e. a public register which identifies the ultimate beneficial owners (“UBO’s”) of companies and trusts.
UBO is defined as any natural person who ultimately owns or controls the customer (a corporate or other legal entity) and/or a natural person on whose behalf a transaction or activity is being conducted. For corporate entities the definition of a UBO is further specified as a natural person that ultimately holding a share, controlling interest or ownership interest of at least 25% plus one share in an entity. If a UBO cannot be identified, the natural person holding the position of senior managing official is in principle registered as UBO.
The UBO-register should be accessible to the competent authorities (such as tax administrations and national banks) and EU Intelligence Units, to the obliged entities (financial institutions, lawyers, notaries and accountants) and to the public when they are able to demonstrate legitimate interest. It is anticipated that the national UBO-registers will be eventually linked at EU level through a central European platform.
Member States now have two years to set up an adequate and accurate UBO-registers for corporate entities established within their territory and it is expected that national UBO-registers will be introduced in the course of 2017.
In relation to Slovenia, the draft Bill implementing the Directive to Slovenian legislation was already published for public comments and it planned to be adopted by 1 April 2016. The Bill envisages the UBO information to be listed in the already existing Business Registry as a new category of information whereby the UBO’s name, residence and controlling interest will be publicly accessible and the remainder of information (in different scopes) should only be available to authorities, obliged persons when identifying customers and persons with legitimate interest.
The obligation to maintain a UBO register, of course, aims to provide greater transparency in financial transactions, combat money laundering, tax fraud and terrorist financing which are all of vital importance in this day and age however it should be pointed out that it already raised certain concerns in relation to privacy of natural persons / personal data. Under the Directive, the member states are only allowed to deny the obliged entities and persons with legitimate interest access to the UBO information in exceptional circumstances or on a case-by-case basis. Therefore, the procedure on deciding whether the claimed interest is in fact legitimate could prove to be the battleground between transparency required by the Directive and data protection. Based on the draft Bill, Slovenia’s approach will be to appoint the Office for prevention of money laundering as the competent institution for the review of legitimate interest while the information commissioner should act as the appeal body.