Beneficial Ownership
Transparency and access to ultimate beneficial owner (UBO) information in the EU
Overview
Beneficial ownership refers to the individuals who ultimately own, control, or benefit from a legal entity, such as a company, trust, or foundation. These individuals are often the true owners behind the legal facade of an entity. Understanding beneficial ownership is crucial for various reasons, including transparency, regulatory compliance, and the prevention of financial crimes such as money laundering and corruption. The judgement 2022- 912 of the European Court of Justice of 22 November 2022 has invalidated the access by the general public to the beneficial owner information, which was granted by the AML5 directive, thus paving the way for granting conditional access to UBO (Ultimate Beneficial Ownership) information based on the demonstration of a legitimate interest. Key elements about beneficial ownership include:
Key Points
- 1
Ultimate Control: Beneficial ownership focuses on identifying the individuals who exercise ultimate control over an entity, rather than those who may be listed as legal owners on official documents.
- 2
Legal Entities: Beneficial ownership applies to various legal entities, including companies, trusts, foundations, partnerships, and other structures.
- 3
AML and KYC Measures: Identifying beneficial ownership is an essential component of Anti-Money Laundering (AML) and Know Your Customer (KYC) measures. Financial institutions and other regulated entities are often required to conduct due diligence to identify the true owners of their clients.
FEBIS Position
Understanding beneficial ownership is crucial for transparency, preventing financial crime, and combating corruption. It helps authorities, regulators, and businesses identify the individuals who have a significant interest or influence over an entity, even if their ownership is obscured through layers of complex ownership structures. Art 12-2-j of the 6th AMLD recognised legitimate interest to access UBO for providers of AML/CFT products, to the strict extent that products developed on the basis of the information referred to in paragraph 1 or containing that information are provided only to customers that are obliged entities or competent authorities.
Implications for Members
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FEBIS members are instrumental in providing updated, accurate and comprehensive information on businesses which is not only used for creditworthiness assessment, but also by obliged entities having to comply with provisions of the AML directive, anti-bribery laws etc. and more generally by businesses that have implemented due diligence processes before entering into/during a business relationship.
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Getting full access to effective, updated, and accurate beneficial ownership information is key for business information providers, who act as a trusted third-party information provider for entities that have implemented due-diligence processes and have therefore a legitimate interest to access it, thus guaranteeing continuity of service for obliged entities and FIUs and thus prevent prejudicial disruption.
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After the 2022 ECJ Judgement, many national UBO registers disconnected access to beneficial ownership information. With the adoption of the 6th AML directive, art 12_2 j has recongised a legitimate interest for BIPs to access and process this data for FIUs and competent authorities but not at large, and some national interpretations are still challenging. FEBIS is pushing for a global recognition of BIPS legitimate interest across all EU legislation and all EU Memebr States.
Key Dates
22 Nov 2022
ECJ judgment C-37/20 & C-601/20: general public access to UBO registers invalidated
18 Jan 2024
Political agreement on AML Package with harmonised beneficial ownership rules
1 July 2025
AMLA begins operations
10 July 2027
Main provisions of AML Regulation (EU) 2024/1624 apply, including harmonised BO rules