By Andrew Lambe, 16th Feb 2017 (Updated 12th June 2017)
The Fourth EU Anti-Money Laundering Directive (AMLD4), was transposed into Irish law 26 June 2017. A major part of this is the creation of a ‘Beneficial Owners Register’ which we covered in a previous blog. However, there are some other new provisions to be aware of which are as follows:
1. More emphasis on ultimate beneficial ownership and enhanced customer due diligence (EDD)
The requirement for Irish Companies to hold their own beneficial ownership register was transposed into Irish Law by Statutory Instrument 560 of 2016. This requirement is retrospective, in that all Irish Companies (with the exception of Irish Companies that are listed on a regulated market within the EU) should have built and maintained this register since November 2016. There is no exemption for Irish Companies who are subsidiaries of listed companies. There is a statutory obligation on all Irish Companies to maintain this register and keep it current.
Regulations from the Department of Finance are expected before the end of 2017 which will formalise the establishment of a new Central Registry of Beneficial Ownership for Irish Companies. This registry is expected to be held by the Companies Registration Office for Irish Companies, the Revenue Commissioners for trusts and the Central Bank of Ireland for ICAVs.
What is a beneficial owner?
The EU introduced the AMLD4 to promote greater transparency among companies in its member states and to ensure that ensuring anti-money laundering regulations are improved. One method of achieving this goal is through identification of the beneficial owner of a company.
Under Article 3(6) of AMLD4, a beneficial owner is any natural person(s) who ultimately owns or controls a company, or who holds more than 25% of the issued share capital. In the case of a Company Limited by Guarantee (CLG), the beneficial owner is the individual who would be considered to be the Managing Director or Chief Executive Officer of the company.
This legislation ensures that ownership of companies cannot be anonymous and it will no longer be possible for the information of shareholders to be kept private. This will particularly affect companies with complex ownership structures whereby it would have been difficult to identify the beneficial owners previously.
The 5th AML directive proposes to lower the threshold to 10% for companies that present a risk of being used for money laundering or tax evasion. This has already been taken quite seriously by both Banks and Trust & Company Service Providers alike, who would insist on obtaining customer due diligence for shareholders who hold 10% or more in a company.
It has been proposed that further information on the introduction of the Central Registry will be introduced next month. It has also been suggested that there will be no filing fee to update the Register and a three-month grace period will be offered to companies to make their filings once the Register is up and running.
The Central Registry will not be available to the general public; however, it will be available to government departments, the Central Bank and other entities who are obliged to carry out customer due diligence checks such as banks, accountants, solicitors and anyone with a legitimate interest in enforcing anti-money laundering regulations.
What do I need to do to ensure my Irish Company is compliant?
The next steps for all Irish Companies is to build a register of beneficial owners. This register should be kept with the 7 existing statuary registers and filed with the Central Registry once this has been established.
2. An expanded definition of a who is considered a politically exposed person (PEP)
Enhanced Due Diligence (EDD) is required to be carried out in respect of politically exposed persons (PEPs). AMLD4 widens the scope of PEP’s to include domestic (not just foreign) PEPs and also defines “family members” and “persons known to be close associates”. Regulated entities must have a procedure in place for identifying PEP’s. Where a person ceases to have the characteristics of a PEP, the obliged entity must, for a period of at least 12 months thereafter, consider the continuing risk posed by that person and apply appropriate and risk-sensitive measures until such time as the person is deemed to pose no further PEP- specific risk.
3. Cash payments threshold to trigger AML checks lowered to €10,000
Any person trading in goods in respect of transactions involving the receipt of cash of at least €10,000 is considered a ‘designed person’ and is obliged to carry out full AML checks and risk assessments on their clients. This threshold has been lowered to €10,000 from €15,000 under the new legislation.
4. Legislation expanded to included entire gambling sector beyond just casinos
Gaming arcades, bookmakers and online gambling websites are now brought into the net and obliged to conduct AML checks on their customers. For gambling services, the legislation allows member states to introduce exemptions, but only after a risk assessment has been undertaken and without allowing exemptions for casinos and cross-border online gambling. Other member states would be informed of any exemptions granted. Member states would similarly be allowed exemptions, under certain conditions, for certain types of e-money instruments.
5. An enhanced risk-based approach to AML is required, requiring evidence-based measures.
Central to AMLD4 puts greater emphasis on a risk-based approach to addressing money-laundering and terrorist financing risks. A clear understanding of your clients’ business is even more important than ever. At present, certain automatic exemptions are available from the requirement to carry out simplified due diligence (SDD) e.g. if the customer is a credit institution in the EU or a third country with equivalent AML measures or is a listed company. These important automatic exemptions will no longer be available under AMLD4. Instead, a decision to apply SDD has to be based on the obliged entity’s assessment that the relationship or transaction represents a lower degree of risk. There will be a higher expectation on service providers to check a list of persons/entities where sanctions may be applicable.
For more information on any of the information covered in this article, please do not hesitate to contact the experts at Company Bureau on +353 1 6461625 or e-mail firstname.lastname@example.org.