Being on top of Ultimate Beneficial Ownership Compliance: 2020 takeaways

12 January 2021 - Ultimate Beneficial Ownership (UBO) compliance has been one of the prevailing topics for policymakers and governments over the last decade, and 2020 is no exception. While for lawmakers it is still a field for further discussion, companies in different jurisdictions are already required to be compliant with the UBO laws already set out.

We suggest looking into several principles that would help you to manage your company / multinational corporation UBO compliance efficiently, though the prism of recent UBO developments worldwide:

1. Appreciating Diversity

Diversity is a key description of UBO regulations worldwide. While driven by the same principle of increasing transparency, the main definitions and applicable rules and procedures vary from jurisdiction to jurisdiction. The most recent example is the United Arab Emirates, where a unified requirement to file the Registers of Real Beneficiaries and Partners or Shareholders was introduced and applied for all commercial Free Zones in August 2020. However, the Free Zones determine the filing procedure separately, as well as UBO data filed differing in each zone.

It would not be possible to identify the beneficial owner for all relevant entities using only one rule. Due to the diversity of laws applicable, the process of ascertaining, proving and filing of beneficial ownership information will be different in each jurisdiction (even if the beneficial owner reported is the same).

2. Comprehensive approach

Generally, each jurisdiction may opt in to the requirement for a company to a) ascertain the beneficial owner(s) and keep this information in an up-to-date state internally, and/or b) ascertain the beneficial owner(s) and file this information with the relevant authorities. For example, in March 2020, the Companies Commission of Malaysia (CCM) issued the Guideline for the Reporting Framework for Beneficial Ownership of Legal Persons. According to the framework, Companies are required to a) obtain, keep and update the beneficial owner information at the entity level during a Transition Period (1 March 2020 – 31 December 2020) and b) obtain, keep & update the beneficial owner information and notify CCM within 14 days after the transition period ends. A similar requirement for keeping up-to-date information internally has been introduced in various jurisdictions (Ireland, Pakistan, etc.); however, companies are often neglecting it, by focusing only on the filing requirement. For that, the consequences could be severe. In Malaysia, failure to comply with above stated framework in general (i.e. including requirement a) may lead to administrative penalties or imprisonment. Thus, it is important to approach UBO compliance comprehensively and comply with each requirement fully.

Further to above, it is worth mentioning that any corporate-related change should be fully evaluated with regards to UBO compliance. Board changes, director’s particulars change, transfer of shares, shareholder’s particular change, etc., shall be followed by the update of the internal UBO register/file or reporting to authorities in some jurisdictions. Therefore, comprehensive evaluation is essential.

3. Awareness

As with any other legislation, UBO reporting requirements remain “movable” even after set. Sometimes, it is to ease compliance with the applicable rules and procedures, such as the recent development of UBO reporting procedures in Austria, where it is now possible to file board changes and update beneficial owner information simultaneously (applicable for companies with management being registered as beneficial owners).

After UBO disclosure requirements have been in force for a while, it is natural that regulators develop the legislation with further clarifications to identification of beneficial owners, improve existing reporting procedures and change the ones which are not working in practice. From the companies’ perspective, it is highly important to keep an eye on these developments and comply with those in time.

4. Cooperation

While dealing with UBO compliance, it is often required to look beyond the corporate-secretarial perspective. For example, in Colombia, the UBO reporting requirement is laid down within tax regulations, and companies need to cooperate with their tax advisors in order to comply with the requirements set out by resolutions of DIAN (Colombian Tax Office). The regulations are being issued on an annual basis and provide updated rules, procedure and deadlines for each accounting period. For the current accounting period, the rules are set by DIAN Resolution 000070 of 28 October 2019 are applied, according which reporting dates are set to Spring 2021.

5. Transparency

Looking at the recently introduced UBO reporting requirements, it is obvious that regulators are looking for enhanced transparency, including cases when no actual UBO can be identified. For example, in 2020 legislators in Albania, Malaysia, Mauritius, Kenya and other jurisdictions introduced the requirement to disclose details of the officials of the ultimate owning company in situations when no other natural person can be identified as the actual UBO. While complying with such a requirement remains painful for many multinational corporations, it is quickly becoming the new legal reality. Hence, being transparent in terms of beneficial ownership reporting is one more principle to follow.

In conclusion, there is one important note to mention. Among all the UBO rules to be compliant with, not all are new ones and some of them have already been in place for quite some time. For example, maintenance of a register of persons with significant control in United Kingdom and filing of the list of foreign shareholders in Ecuador are well-known obligations, which yet are equivalent to beneficial ownership requirements in the respective jurisdiction. Hence, no additional actions are required from companies there, and they may transparently and comprehensively approach diverse UBO reporting requirements introduced during 2020.

 

Our contacts

Kariem Abdellatif

Kariem Abdellatif

Head of Mercator by Citco

T+352 47 23 23 265
Ekabdellatif@citco.com
LLuxembourg

Robert-Jan Kokshoorn

Robert-Jan Kokshoorn

Head of Business Development,
Mercator by Citco

T+1 305 577 1116
Erkokshoorn@citco.com

Chris Butler

Chris Butler

Head of Operations,
Mercator by Citco

T+370 5 204 7300
Echbutler@citco.com
LVilnius