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The 4th EU AML Directive on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing had affected all entities in the EU as it had introduced a system of central registers to store information of beneficial ownership of legal entities within the EU on a national level by each member state.
Since the transposition of the 4th EU AML Directive into national law, Cyprus has not yet introduced a UBO register, but very recently with the introduction of the 5th EU AML Directive in Cyprus, the Council of Ministers on 16/12/2020, have resolved to appoint the Registrar of Companies as the competent authority to maintain a centralized register of beneficial owners of companies and other legal entities; and an intermediate (temporary) platform has been developed for this purpose. Therefore, the realization of the 4th EU AML Directive & 5th EU AML Directive provisions are fast becoming a reality in Cyprus.
The Registrar of Companies of Cyprus has given notice to all companies that a collection of UBO data will commence on 16/03/2021 (delays are expected due to Covid-19 complications). It is vital to note that all legal persons and legal arrangements (trusts) have a duty to comply with the decision of the Council of Ministers and the provisions of the 4th & 5th EU AML Directive.
Based on this recent decision all legal entities and other legal arrangements will need to provide the Registrar with information on their ultimate beneficial ownership.
Ultimate Beneficial Owner (UBO) is always a natural person or persons and can never be a legal entity or a legal arrangement. Under EU and therefore Cyprus legislation a UBO is:
(a) in the case of corporate entities:
the natural person who ultimately owns or controls a corporate entity through direct or indirect ownership of a sufficient percentage of the shares or voting rights or ownership interest in that corporate entity. The indication of direct or indirect shareholding/ownership shall be a shareholding of 25% plus one share.
However, in cases where no clear UBO can be identified through the aforementioned formula then a UBO can be the natural person who holds the position of senior managing official. Therefore, the legislation leaves no room where a legal person can be without a UBO.
(b) in the case of trusts:
(i) the settlor;
(ii) the trustee or commissioner;
(iii) the protector, if any;
(iv) the beneficiary, or where the individual benefiting from the legal arrangement or legal entity have yet to be determined, the class of persons in whose main interest the legal arrangement or entity is set up or operates;
(v) any other natural person exercising ultimate control over the trust by means of direct or indirect ownership or by other means.
Based on the notice by the Registrar, Cyprus incorporations will have a six-month grace period starting from 16/03/2021 (this has been changed to twelve-months grace period) to submit accurate, adequate and current information in regards to their beneficial ownership. The information requested is currently not clear but it is safe to deduce that the following will be the minimum requested:
name
date of birth
country of residence
nationality
Nature of ownership
Extend of Beneficial interest
It is important to note that during these first twelve months access to the registry will be given only to competent authorities and upon the expiration of this initial period a final platform will be established by the early months of 2022 (this will probably change and a longer extension will be granted). The final form of this platform as well as its accessibility remains to be seen. Moving on from this interim solution the provisions of the 5th EU AML directive will be implemented.
Finally, it must be noted that the final platform will be interconnected with other EU central registers via the European Central Platform.
This new development, in Cyprus as well as the whole EU, is expected to enhance and strengthen transparency and ultimately will help prevent the misuse of legal entities for money laundering and terrorist financing purposes. As a reputable international business hub, Cyprus will have laid even stronger foundations for investment and innovation while adhering to national and international regulation aiming to combat money laundering and terrorist financing.
*DISCLAIMER: This article and its publication are intended to provide a brief introduction and act as a general guide. This is provided for information purposes only and cannot be utilized as a substitute for professional advice. This document does not represent a legal opinion and one must not rely on it without receiving independent advice based on the particular facts of its own case. No responsibility is accepted by the author or the publishers for any loss suffered from acting or refraining from acting based on the contents of this publication.
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