Spot on beneficial owners’ registries

ABBL Published 15.12.2017

Will the draft Bills setting up beneficial owners’ registries of companies/legal entities and fiduciary arrangements result in more obligations towards financial stakeholders?

As long awaited by the financial stakeholders, the Luxembourg legislator released last week two draft bills transposing articles 30 and 31 of the 4th anti-money laundering directive (UE 2015/849), which will set up respectively a register of beneficial owners of companies/legal entities (a.k.a. “REBECO”) and a register of fiduciary arrangements. It comes without saying that both bills will firstly impose new obligations on companies and legal entities as referred to in the law of 18th December 2002 on the register of commerce and companies, except for listed companies under specific conditions, common funds (“fonds communs de placement/FCPs)” and branches of foreign companies.

According to draft bill n°7217, the companies will be required not only to transmit electronically to the registry held at the Luxembourg trade and companies register a set of defined information pertaining to their beneficial owners at the latest six months after the entry into force of the law, but also to make sure to keep and maintain the accuracy of such information, failing which criminal sanctions might apply.

A limited access to this register shall be granted to “professionals” within the meaning of the law of 12 November 2004 on the fight against money laundering, such as for instance credit institutions and professionals of the financial sector, while undertaking the customer due diligence. On the one hand, such facility may prove useful for the professionals to abide to their due diligence and risk assessment obligations under the Luxembourg AML/CTF legal framework, bearing in mind, on the other hand, that the latter will also have to “promptly inform the Register as soon as they find either the existence of erroneous data or the default of all or part of the data, or a lack of registration/modification /struck off of such data“. This, in turn, may result in an increase in the administrative burden undertaken by bankers, given the flows of customer due diligence’s information to be processed on a daily basis.

The draft bill n°7216 foresees firstly that Luxembourg fiduciary agents of fiduciary arrangements under the Luxembourg law on trusts and fiduciary arrangements of 27 July 2003 will have to get and keep at their registered office a set of data pertaining to the arrangement, to then report it into a “Registre des ficucies“, as long as the arrangement generates tax consequences. The practical modalities pertaining to such register to be further determined by Grand-Ducal Regulation resembles those of the REBECO, having noted that only national authorities will be able to access the content of the register.

Given that the law of 2003 only allows certain financial entities/public official bodies to act as fiduciary agents (“fiduciaires”), among them credit institutions and investment firms, this implies that such entities will be obligated to solely define the characteristics of a fiduciary arrangement generating tax consequences, yet not illustrated within the draft bill. Thereafter and without legal certainty, banks will be expected to report, modify and update the register, juggling with potential administrative sanctions and injunctions, shall they fail to abide to their upcoming new duties. Banks may hence face challenging times ahead in adapting their anti-money laundering/counter-terrorism fighting procedures and processes.

Julien Leroy, Legal Adviser at the ABBL 

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