Article Post on 13 December 2017

Implementation of the Luxembourg Register of Ultimate Beneficial Owners has been Announced... Get Ready!

_Meeting the international requirements for transparency of legal persons under the Fourth Anti-Money Laundering Directive, the Luxembourg government presented on Wednesday, December 6, the 7217 bill establishing a register of ultimate beneficial owners ("BO") in Luxembourg.

This register, introduced under the abbreviated name of REBECO, will be managed by the RCSL economic interest group in charge of the Registre de Commerce et des Sociétés (RCS) and will be responsible centralising and maintaining data concerning the BO (e.g. first name, surname, citizenship(s), date and place of birth, etc.) of all legal persons1 registered with the RCS (the registered entities), excluding companies whose securities2 are tradable on the regulated market3 and subject to a transparency regime.

This information must be accurate, complete and up-to-date. The 7217 bill suggests in this regard that supporting documents should be provided when registering the information in question with REBECO, without further specification. This data must be communicated in electronic form by all registered entities (the latter will be responsible for these declarative obligations, which will be accompanied by dissuasive sanctions), including of course those registered in the RCS before its entry into force of law. The concerned entities will then have six months from entry into force of law to comply with these obligations

It should be noted that the information contained in REBECO will not be public and access to the register will be restricted to the Luxembourg administrative, police and judiciary authorities (together, the national authorities), Luxembourg self-regulatory organisations, professionals involved in the fight against money laundering and, to a lesser extent, individuals or organisations residing in Luxembourg and demonstrating a ‘legitimate interest’ in knowing the details of a BO. Requests from the latter category (of non-professionals) will thus be screened by a coordinating commission under the authority of the Minister of Justice (the Commission), with responsibility for assessing the underlying motivations of the applicant.

As it stands, the 7217 bill does not contain any characterisation of ’legitimate interest’ that would allow access to REBECO data; it seems that this concept must be assessed in concreto, i.e. on a case-by-case basis and according to the circumstances of the case presented by the claimant.

It should be noted that certain provisions of the 7217 bill are already evolving, particularly those relating to the protection of personal data. Indeed, the law of 2 August 2002 on the protection of individuals with regard to the processing of personal data should soon be repealed and replaced by Regulation (EU) 2016/679 of 27 April 2016, which will enter into force in May 2018.

The table reproduced below aims to summarize the principles laid down in the 7217 bill, thus providing a better grasp of this future REBECO, which is the subject of significant questions.


 

Information on the BO to provide in/to the REBECO

  Persons authorised to access the REBECO and conditions of access   Criminal sanctions provided

Following article 3 of the 7217 bill, entities registered with the RCS or their agent are required to provide / keep updated:

-    name,
-    first name(s),
-    citizenship / nationality(s),
-    date (day / month / year) and place of birth,
-    country of residence,
-    exact and complete private or professional address,
-    Luxembourg or foreign identification number, and
-    nature and extent of ‘beneficial interests held’
4 ,

of their BO, to/with the REBECO.

 

These issues are governed by chapter 4 of the 7217 bill. The following persons:

  • have unlimited and unconditional access to REBECO:
    the competent national authorities in the fight against money laundering and the financing of terrorism, who will be able to access electronically all the information contained in REBECO by means of a password. Foreign administrative or judicial authorities should therefore not have direct access to REBECO, subject to possible modalities on exchange of information that could be put in place between the different registers of economic beneficiaries.
  • have limited and unconditional access to REBECO:
    Luxembourg self-regulatory bodies with a general supervisory role (e.g. the Bar Council, the Chamber of Notaries, the Institute of Company Auditors, the Order of Chartered Accountants, the Chamber of Bailiffs), which may only have access to certain information contained in REBECO electronically by means of a password.


    The professionals referred to in article 2 of the amended law of 12 November 2004, which will be able to access only certain information contained in REBECO and only relating to their customers electronically by means of a password.
  • have limited and conditional access to REBECO:
    persons or organizations resident in Luxembourg having a ‘legitimate interest’ in knowing the details of a BO: they must state the motives for their request to the Commission, which may accept or refuse to give them access to REBECO5. In case of acceptance, these persons or resident organizations will only be able to access certain information relating to the BO of the legal entity concerned, the other information remaining confidential.

    To be noted: according to article 16 (1) of the 7217 bill, if a BO fears being exposed to a ‘risk of fraud, kidnapping, blackmail, violence or intimidation’, or is a minor or incapacitated, the BO can ask to limit access to its personal information to the national authorities only. Such requests will be assessed by the Commission.
 

Sanctions for declaratory failure are provided for in chapter 8 of the 7217 bill as follows:

  • a fine between EUR 1.250 and EUR 1.25 million for:

    the registered entity or its agent who has failed to submit an application for registration to REBECO (for the purpose of evading the information requirements of the BO);

    the registered entity or its agent who has knowingly disclosed information that is inaccurate, incomplete or not current on the BO;

    the registered entity or its agent that has failed to obtain or retain the information on the BO, or the registered entity or its agent who has knowingly provided to the national authorities, self-regulatory organizations or professionals inaccurate or out-of-date information on the BO.
  • Article 25 of the 7217 bill also sanctions a fine of EUR 1.250 to EUR 1.25 million for self-regulatory bodies or professionals who knowingly request access to information from REBECO outside of their mission of control / duty of vigilance in relation to the fight against money-laundering/terrorism financing.

 

Please note that this presentation does not claim to answer all the questions raised by the 7217 bill and the establishment of REBECO. One of the highlights will most certainly be the Commission's assessment of the concept of ‘legitimate interest’ (does a journalist seeking to document an investigation have a legitimate interest in accessing the REBECO database?). Faced with these uncertainties, we cannot help but fear possible abuses ... Yet, we should not forget that business life is imbued with a certain degree of confidentiality necessary for the conducting of business.

 

_A PDF version of this article can be dowloaded below.  

 

1. Luxembourg branches of foreign companies, although registered with the RCS, should thus not be concerned as they do not have legal ‘personhood’ of their own.

2. In our view, the term ‘securities’ refers to both capital and debt securities.

3. Although the 7217 bill does not refer to it, it seems to us that the term ’regulated market’ must be understood here in the meaning of Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 concerning markets in financial instruments.

4. Without knowing what this concept exactly covers, the recital 13 of the Fourth Anti-Money Laundering Directive only refers to the ‘approximate weight’ of such interests; is it the value, respectively the valuation, of the possessions in question? This point will certainly have to be clarified.

5. It should be noted that the applicant should be able to challenge before the administrative courts a refusal decision by the Commission. The comments in the 7217 bill suggest that the registered entity involved in the access request could also object to a decision by the Commission.

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