Transactions January 2019

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The beneficial ownership registry, a new tool against money laundering.

By Alejandro Ferreiro

On 25 October 2018 the Beneficial Ownership Registry, a tool created to fight against money laundering and terrorism financing, was launched in the Honourable Association of Registrars of Spain.

The Beneficial Ownership Registry contains complete and updated information on the beneficial ownership of companies, that is, on the natural persons holding the control over a company, either directly or indirectly.

Such information comes from the Companies Registry in which, since 2018 and pursuant to Order 319/2018 of the Ministry of Justice, companies are obliged to include the identification of the beneficial owner upon filing the annual accounts. Such Order of the Ministry of Justice was issued for harmonisation purposes with the EU regulations, particularly, in respect to Directives (EU) 2018/843 and 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 purposes of money laundering or terrorist financing.

Directive (EU) 2015/849 establishes that State Members shall ensure that the information on the beneficial ownership is deposited with a central registry in each State Member, either a commercial registry, a registry of companies or a public registry.

This requirement has obliged all State Members of the European Union to create and manage a national registry system of identification of beneficial owners of companies, being also obliged to ensure that such system facilitates international cooperation. The management of such system is assigned to the competent entities acting as the Companies Registry in each State Member.

As regards the creation of the Beneficial Ownership Registry, the Dean of the Honourable Association of Registrars of Spain, María Emilia Adán, has declared that the new registry is adapted to the needs to fight against money laundering, to the extent it is a public and regulated registry, which operates fully in compliance with data protection and is constantly updated.

As stated above, since the year 2018, companies must attach to the annual accounts a declaration identifying their beneficial owners. In this regard, beneficial owner shall mean such natural person who may directly or indirectly control a percentage above 25% of the capital or the voting rights of the company. If no person controls such a percentage of the capital, the details of the director recorded as equivalent beneficial owner, shall be supplied.

Therefore, the new Beneficial Ownership Registry allows to know, firstly, the beneficial owners of a company, and secondly, the companies of which the natural person is the owner and finally the companies within the control chain of a third-party company.

In this regard, the director being liable for signing the annual accounts, upon provision of the declaration of beneficial owner, such director assumes the liability that the beneficial owners declared effectively are so, which is precisely where the strength of the new system lies. In this regard, should false information be supplied, directors could be even accused for an offence of forgery of commercial documents. The second point where, pursuant to the Registrars, the effectiveness of the Beneficial Ownership Registry lies, consists of the impracticality to operate in the commercial trade if the company does not file its annual accounts. On the one hand, due to the impossibility to register a great part of acts with the Companies Registry until the annual accounts are filed; on the other hand, due to the impossibility to take part in public auctions and; finally, because in case of a creditors’ meeting, the director would be declared as guilty.

Then, we may conclude that the creation of the Beneficial Ownership Registry shall imply a benefit or advantage due to the following characteristics:

  • Reliable system: It is a reliable system which also respects data protection regulations. In this regard, the Companies Registry is an institution with a solid organisation and structure and the Registrar shall be, as a public officer, the person to solve the information requests submitted.
  • Continuous update: Beneficial ownership shall be constantly updated as documents may be submitted by directors of companies, which shall occur at least, once a year with the filing of the annual accounts.
  • System interconnected with the system of other countries: There shall be an interconnection of the different European Companies Registries, the beneficial ownership being publicised among them on a European level.
  • Complete system: It is a complete system because all companies shall be obliged to inform on the beneficial ownership. This way, all beneficial owners shall be identified, since if they are not included in the annual accounts, they may not be filed.
  • Verified information: The origin of the information is the deposit of annual accounts carried out by directors of companies, whose position is verified by the Companies Registrar. Moreover, such directors shall be liable, even criminally, in the event of forgery, since it could be considered as forgery of commercial document.