The Grand Duchy of Luxembourg has fulfilled its European obligations in the fight against money laundering and the financing of terrorism by transposing Directive 2015/849 of 20 May 2015 (also known as the 4th EU AML Directive) into national law with the brand new Law of 13 January 2019 (the RBE Law). Below is an overview of the important disclosure obligations that will soon apply to a wide range of Luxembourg entities.
A few months after some of its neighbouring countries, the Grand Duchy of Luxembourg implemented the 4th EU AML Directive by passing the RBE Law. The RBE Law creates a new Luxembourg register of beneficial owners (the RBE). A Grand Ducal Regulation is expected to follow in the upcoming weeks to deal with the practical aspects of the implementation of the RBE Law.
Identification of the ultimate beneficial owner(s) (the UBO(s))
The RBE Law itself does not provide a definition of what is considered to be a beneficial owner, but instead makes reference to the definition contained in the Law of 12 November 2004 on the fight against money laundering and terrorist financing, as amended (the AML Law), providing that a beneficial owner is “any natural person who ultimately owns or controls the entity or any natural person for whom a transaction is being conducted". The AML Law further provides that, in the case of companies, it is “any natural person who ultimately owns or controls a company through direct or indirect ownership of a sufficient percentage of the shares or voting rights or ownership interest in that company, including bearer shareholdings, or through control via other means (…)" and goes further by setting a minimum threshold of 25% of direct or indirect ownership. We can therefore consider that a beneficial owner can be determined either by an ownership criterion, but also by a control criterion.
Finally, the AML Law specifies that, if after having exhausted all possible means and provided that there are no grounds for suspicion, a beneficial owner will be deemed to be any natural person who holds the position of senior manager (dirigeant).
Concerned Luxembourg entities
The scope of application of the RBE Law is broad as the entities that are concerned with the requirement of the new Luxembourg register of beneficial owners are those that are registered with the Register of Commerce and Companies of Luxembourg – i.e. the RCS. This encompasses commercial companies (e.g. the S.à r.l., the S.A., the SCA…), civil companies, Luxembourg investment funds (UCITs, part II Funds, SIFs, SICARs, RAIFs and other AIFs), Luxembourg common funds (fonds communs de placement), the non-profit associations (ASBLs) and trusts (fondations).
Information to be disclosed
The RBE will contain the following information: name, date and place of birth of the UBO, the nationality, the country of residence, the exact private or professional address of the UBO, his/her identification number, if he/she is registered with the Luxembourg Register of natural persons, and his/her national identification number if he/she is non-resident in Luxembourg. In addition, the nature and the extent of the beneficial interest held by the UBO will also have to be disclosed. As an exception, listed companies on a regulated market in Luxembourg, in the European Economic Area, or in a third country that imposes obligations recognized as equivalent by the European Commission, within the meaning of Directive 2004/109/EC, will only have to provide the name of the regulated market(s) on which their securities are traded. Such information will need to be kept by the manager of the RBE (being the Luxembourg Business Registers) for a period of 5 years following the deregistration of the company from the register of commerce and companies.
Access to the information
The national authorities, such as the Luxembourg tax authorities, the credit and financial institutions, the bailiffs and the notaries, as well as any individual (whether residing in Luxembourg or not), will have access to the RBE without having to demonstrate a legitimate interest. However, the exact private or professional address and the identification number of the UBO will not be accessible. The granting of access to individuals is derived from Directive 2018/843 of 30 May 2018 (the 5th EU AML Directive), which must be transposed by all EU Member States into their national law by 10 January 2020 and which goes beyond the requirements of the currently transposed Directive 2015/849 of 20 May 2015 (the 4th EU AML Directive).
As an exception, a company or a UBO may request to limit the information available to national authorities, but only if it is able to demonstrate exceptional circumstances, for example, if it could expose the UBO to a disproportionate risk, if there is a risk of fraud, possible blackmail, kidnapping, violence against the UBO, intimidation or in case the UBO is either a minor or legally incapable. For this purpose, a duly motivated request shall be addressed to the manager of the RBE (being the Luxembourg Business Registers). Such limitation cannot be granted for a period of more than three years (renewable).
The duties of the companies and their representatives (but not only)
The Luxembourg companies will be required to collect the required information to be provided by the UBO(s), file such information with the RBE (which has three business days to proceed with the filing), keep the information up-to-date and maintain an up-to-date beneficial owner file at their registered office. This file will contain the same information as that contained in the RBE.
The filing will be made by the company or its representative within one month as from the moment the company has become or should have become aware of the event requiring such registration or modification. Newly incorporated companies will also have one month to file the requested information. Notaries are also permitted to file the information with the RBE, upon the incorporation of a company or upon an amendment to its articles of association. The filing will be made electronically on the website of the RBE manager (Luxembourg Business Registers website).
In case of refusal of the manager of the RBE to file a request, the company will be notified of such refusal and will have fifteen days to resolve this situation and provide the requested documents or information. A subsequent refusal of the manager of the RBE will need to be motivated and indicate the available legal remedies.
All Luxembourg professionals that are subject to the AML Law, such as banks, professionals of the financial sector, notaries and lawyers, as well as any individual, will be required to notify the RBE within thirty days if they consider that the information that has been filed is incomplete and/or erroneous.
As mentioned, a Grand Ducal Regulation is expected to provide further details on, amongst others, supporting documents to be provided together with the filing.
An extract from the register will be available in electronic or paper format upon request. The company will not be alerted when its data will be consulted.
The RBE Law will enter into force on 1 March 2019 and entities will have six months to comply with their new obligations, i.e. 31 August 2019 at the latest.
The RBE Law foresees sanctions against (i) the Luxembourg entities and (ii) the beneficial owners directly consisting of a criminal fine ranging between EUR 1,250 and EUR 1,250,000.
The creation of such RBE, as a result of the transposition into national law of the 4th EU AML Directive, will certainly change the habits of Luxembourg entities and of all professionals working with them and is a step forward towards providing more transparency with respect to the shareholding structure of Luxembourg companies. However, there are still some practical and unclear aspects that need to be addressed by the aforementioned Grand Ducal Regulation.