Europe follows the UK on transparency of ownership

Following our recent blogs on this issue, it now seems that campaigners are starting to see results. In the final days of the last Parliament, the UK enacted legislation to reveal the ultimate owners and controlling individuals behind UK corporates (see here).  From Jan 2016, the identity of any individual or Government body with a controlling interest in a UK corporate – whether direct or through other on or offshore holdings – is to be placed on a public register.  Now Europe has followed suit.  Under the 4th Money Laundering Directive, passed this week, each Member State will be required to implement public, or almost public, central registers of beneficial ownership by a date which is likely to be June 2017. Not only that, but the provisions extend beyond ownership of corporates to require non-public disclosure of interests in express trusts and similar structures, such as foundations.

In outline, the European directive will require member states to:

  • ensure that corporate and other legal entities incorporated within their territory obtain and hold the required adequate, accurate and current information on their beneficial ownership, including the details of the beneficial interests held. Beneficial interests are defined in a similar way to the UK law i.e. involving direct or indirect holdings of 20% or more but also other means of control.
  • store the information in a central register in each member state which must at least be accessible to competent authorities and financial intelligence units, entities such as law firms and financial institutions that must undertake customer due diligence under the directive, and any other person or organisation that can demonstrate a legitimate interest.

In relation to express trusts, trustees will be required to keep, and disclose to certain regulated firms, details of the trustees, settlor, protector (if any), beneficiaries and others who have control over the trust.  That information must also be stored in a central register, accessible principally to regulators and financial intelligence units – and firms for the purposes of customer due diligence checks – where the trust “generates tax consequences”.

Those who structure their affairs with an interest in maintaining confidentiality in the assets or businesses they own should take note.  There have also been calls for the Overseas Territories and Crown Dependencies, and through the G20 other countries, to implement public registers.  With transparency of ultimate beneficial ownership set to become a reality in Europe, will other countries follow?  If not, it will continue to be possible to use an overseas company  -for confidentiality reasons – and use it to do business, and own assets, here.