On 6 December 2017, two Bills of Law which will implement articles 30 and 31 of the Directive (EU) 2015/849 of the European Parliament and the Council of 20 May 2015 on the prevention of the use of the financial system for the purpose of money laundering or terrorist financing (“4th Anti Money Laundering Directive”) were introduced to Luxembourg’s Chamber of Deputies.
The Bills of Law will put in place in Luxembourg two registers to hold and provide information on beneficial owners of Luxembourg legal entities and express trusts.
The definition of “beneficial owner” is the same as the definition set out in the law dated 12 November 2004 on the fight against money laundering and terrorist financing as amended (“AML Law”). However, the definition might be amended when Bill of Law n° 7128 enters into force (see our alert on this topic).
1. Register of beneficial owners (Bill of Law n°7217)
Luxembourg legal entities will be required to comply with the following obligations and could face a criminal fine of up to €1,250,000 if they fail to do so:
- To obtain and hold at their registered office information on their beneficial ownership (companies are obliged to keep such records for a period of 5 years after the dissolution or end of the existence of the entity);
- To provide information about their legal owners and beneficial owners in the limits described below to national authorities (upon request), self-regulatory bodies which monitor compliance with anti-money laundering and counter terrorism obligations (upon reasoned request) and obliged entities when they are taking customer due diligence measures (upon reasoned request);
- To request the filing in the register of the information on their beneficial owners.
The purpose of the table below is to highlight the main features of the register of beneficial owners, REBECO. The practical formalities relating to REBECO’s operations and access will be set out by a grand-ducal regulation.
Who is the administrator of the register? Economic interest grouping RCSL (but separate database from the Trade and Companies register) Which legal entities are concerned?- Commercial companies (private limited liability company, public company limited by shares, corporate partnership limited by shares, simplified joint stock company, simplified private limited liability company, general corporate partnership/unlimited company, common limited partnership, cooperative society, European company) except temporary commercial companies and commercial companies by participation
- Economic interest groupings
- European economic interest groupings
- Civil law partnerships
- Non-profit organisations
- Foundations
- Pension savings associations
- Agricultural associations
- State and municipality public institutions
- Mutual insurance associations
- Special limited partnerships
- Other entities whose registration is foreseen by law
Which information has to be provided and stored in the register? Information regarding beneficial owners:
- Name
- First name(s)
- Nationality(ies)
- Day, month and year of birth
- Place of birth
- Country of residence
- Accurate private/professional addres
- National/foreign identification number
- Nature and extent of the beneficial interests held
The information and the supporting documents are stored in the register during 5 years after the dissolution or end of existence of the entity.
A fine of between €1,250 and €1,250,000 will be imposed to entities or their proxies which have consciously registered non-adequate, non-accurate and non-current information.
Who has to request the register to proceed to the registration? How?
- The above entities or their proxies
- The notary, writer of the incorporation deed or any amending deed of the concerned entity, can also request the registration
- Temporary provision: Entities must request the registration of the information within six months from the entry into force of the law.
- Principle: Entities must submit their request for registration at the latest within a month from the event which renders it necessary. Failure to do so can result in a criminal fine of €1.250 to €1,250,000.
In such a case, the administrator will send the applicant a request for regularization and the applicant has 15 days to comply with it. In case of default, the administrator will notify the applicant of its refusal of registration and the reasons behind its refusal. The applicant then has the possibility to appeal the decision before the competent jurisdiction. Who can have access to the information stored in the register?
Who can have access to the information stored in the register?
- National authorities have access without restriction. Such authorities include Prosecution authorities, Financial Intelligence Unit, Commission de surveillance du secteur financier (CSSF), Commissariat aux assurances (CAA), Administration de l’enregistrement et des domaines (AED), Administration des douanes et accises, Tax authorities, etc.
- Self-regulatory bodies can access the register in the framework of monitoring the obliged entities’ compliance with anti-money laundering and counter terrorism obligations. Such bodies include the Conseil de l’Ordre, Chambre des notaires, Institut des réviseurs d’entreprises, Ordre des experts-comptables and Chambre des huissiers. These bodies do not have access to the private/professional address and national/foreign identification number.
- Obliged entities as defined in the AML Law (except branches in Luxembourg of foreign obliged entities, as well as foreign obliged entities which supply services in Luxembourg without establishing any branch in Luxembourg) can access the register to perform their customer due diligence measures. They do not have access to the private/professional address and national/foreign identification number.
- Resident people or organizations that can demonstrate a legitimate interest based on a reasoned request addressed to the administrator can gain access to the register. The administrator transfers the request to a coordination commission, which decides on the legitimacy of the access request and informs the applicant, the concerned entity (allowing it to contest the request) and the administrator. They do not have access to the day and place of birth, private/professional address, and national/foreign identification number.
Is it possible to limit the access to the register? On a case-by-case basis, in exceptional circumstances and based on a reasoned request addressed to the administrator, an entity is allowed to ask that the access to the information is limited to national authorities. This is permitted in cases, where such access would expose the beneficial owner to the risk of fraud, kidnapping, blackmail, violence or intimidation, or where the beneficial owner is a minor or otherwise incapable.
The administrator transfers the request the coordination commission, which decides on the legitimacy of the request and informs the entity and the administrator about its decision.
Until the notification of the decision, the administrator limits temporarily the access to national authorities only.
2. Register of trusts (Bill of Law n°7216)
The Bill of Law n° 7116 relates to the fiduciary contracts governed by the law on trusts and fiduciary contracts dated 27 July 2003.
Luxembourg trustees are required to comply with the following obligations:
- To obtain and hold, at their registered office, information on the beneficial ownership of trusts for which they are acting as trustee.
Information includes the identity of the following persons:
- The settlor
- The trustee(s)
- The protector (if any)
- Beneficiaries (if the beneficiaries are designated by characteristics or by categories, the trustee must obtain sufficient information to be able to establish the identity of the beneficiaries at the time of the payout or at the time the beneficiaries exercise their vested rights)
- Any other person exercising effective control over the trust
If the above persons are natural persons, the trustee must collect the same information as for the beneficial owners of the entities, with the exception of the nature and extent of the interests held.
If the above persons are legal persons, the trustee must obtain the legal name of the legal person (including the abbreviation and commercial sign if any), the accurate address of the registered seat of the legal person, the registration number or the name of the register and the foreign registration number (if any) if the legal person is not registered with the Luxembourg Trade and Companies Register.
- To provide, upon request, information to the national authorities (the identity of the above persons and the registration number of the trust)
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To disclose their status as trustees and provide information to obliged entities, where they enter into a business relationship with them as trustees or carry out a transaction which exceeds certain thresholds defined in the AML Law.
The control authorities (CSSF, CAA, AED) control the trustees’ compliance with the above obligations as well as with the professional obligations as defined in the AML Law. They have supervisory and investigative powers and are entitled to impose administrative sanctions and measures.
- To request the registration of the above information at the register for any trust which generates tax consequences.
Trustees have a time limit of 6 months after the law enters into force to comply with the above obligations. The access to the trusts register is limited to national authorities. Bill of Law n° 7116 also provides extended supervisory and sanctions powers to the AED.
3. Additional comments
The implementation of these two new registers will create additional obligations and responsibilities for entities and trustees in Luxembourg. Therefore, they should start getting ready now even though both Bills of Law still have to follow the legislative process and might still be modified before coming into effect.
All stakeholders impacted by these two registers will also have to comply with the applicable data protection laws.
