Transparency Register – Overview of Foreign Reporting Requirements
Among other measures designed to combat money laundering and terrorist financing, the 4th Money Laundering Directive requires the EU member states to set up registers of the ultimate beneficial owners of legal entities. It was left up to the individual member states how to implement the directive, and in doing so, member states have taken different approaches. To help guide you through the various regimes, CMS has put together an overview of the requirements in selected EU member states.
Under the 4th Money Laundering Directive, companies and other legal entities have to identify their ultimate beneficial owners. The beneficial owner of a company or other legal entity is generally a person who owns or controls over 25 % of the shares or interest in that entity. The member states are required to hold this information in a central register and provide access, amongst other, to the competent authorities.
Different reporting requirements
Some countries, such as Germany, put the burden of providing information about the beneficial owners on the shareholders, who have to notify the company or legal entity accordingly. Countries such as France and Poland require the companies to obtain this information, whereas the UK and the Netherlands impose this requirement on both companies and shareholders. In other countries, such as Belgium, it is the intermediaries, such as banks and auditors who have to obtain this information as part of their KYC process. Some countries are still in the process of implementing the directive, although in most cases draft laws have been published so that the approach that will be taken can be seen.
As a result, for example, a shareholder, partner or beneficiary of a trust living in Germany, who is a beneficial owner of a foreign legal entity may be subject to reporting requirements in another member state, even when the shareholding or interest is only indirect, for example via a holding company. In such cases, it is important to know what the legal requirements in that country are. Similarly, managers of foreign legal entities should be aware of the reporting requirements in other member states, as a failure to comply may be an administrative or even criminal offence.
In order to give you an initial overview, CMS has summarized the regulations in selected member states. Of particular relevance to shareholders are those countries such as Germany, the Netherlands (based on the draft law) or the UK, in which direct and indirect shareholders have an active obligation to make any necessary notification.