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Author: Panagiota Rousou

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POSTS BY : Panagiota Rousou
17
Jan2022

REGISTER OF EXPRESS TRUSTS AND SIMILAR LEGAL ARRANGEMENTS

On 18th of June 2021 the Cyprus Securities and Exchange Commission (“CySEC”) announce the issuance of their Directive for the prevention and suppression of money laundering and terrorist financing (beneficial ownership register of Express Trusts and Similar Legal Arrangements).

The implementation of a Register for Trusts and similar legal arrangements was introduced and required by the 5th Anti – Money Laundering Directive, along with the Register for Beneficial Owners for Companies.

Obligation to report:

The trustee bears the obligation to submit information regarding the trust and its beneficial owners. According to Prevention and Suppression of Money Laundering Activities Laws of 2017-2021 (hereinafter “the Law”) the term ‘beneficial owner’ for trusts, includes the following:

  1. Settlors
  2. Trustees
  3. Protectors, if any
  4. Beneficiaries or where the individuals benefiting from the legal arrangement or entity have yet to be determined, the class of persons in whose main interest the legal arrangement or entity is set up or operates
  5. Any other natural person exercising ultimate control over the trust by means of direct or indirect ownership or by other means

The trustee should provide to CySEC the following details for the beneficial owners, which are mentioned above:

  1. Name and Surname
  2. Father’s name
  3. Date of Birth
  4. Place of Birth
  5. Nationality(ies)
  6. Residential Address
  7. Number and country of passport or ID
  8. Date that the person became the ultimate beneficial owner
  9. Nature and extent of interest held directly or indirectly
  10. Their role

What information is submitted:

The required information to be submitted to the registration of a trust is:

  1. The name of the trust
  2. Country and date of incorporation
  3. Governing law
  4. Termination date (if any)
  5. Details regarding the country of residence of the trustee and their residential address
  6. In the event where a trustee or other equivalent person is established or resides outside the European Union and enters into a business relationship on behalf of an express trust or other similar legal arrangement in the Republic, the commencement date, the other party’s name and the agreement governing the business relationship.
  7. In the event where a trustee or other equivalent person is established or resides outside the European Union and acquires immovable property on behalf of an express trust or other similar legal arrangement in the Republic, the registration number and address of immovable property and the title deed.
  8. Any other information or supporting documents the CySEC request for identification purposes.

Who has access to this information:

CySEC may grant access to submitted information to Supervisory Authorities, the Unit, Customs and Excise Departments, Tax Department and Police without any limitation.

However, the obliged entities may have access only to the name and surname, month and year of birth, country of residence, nationality, and nature and extent of interest held directly or indirectly. The obliged entities should submit a) a statement indicating that the purpose of obtaining such information is purely for due diligence procedures and for identification of their client, b) along with a consent of the trustee.

The persons who can demonstrate a legitimate interest may submit an application duly justifiable to have access to the Trusts’ Registry. Then, CySEC shall inform the trustee within ten days where they will be able to submit their observations.

In addition, CySEC may grant access to the Trusts’ Registry to legal or physical persons in relation to a trust which holds or owns a controlling interest in a company that is not incorporated in Cyprus upon the written request of the said person.

It is worth mentioning that access to Trusts’ Registry is on the discretion of CySEC and upon payment of respective fee.

Exemption of publishment of details of beneficial owner:

On exceptional cases and upon detailed examination CySEC may exempt from the access wholly or partially to information related to beneficial owner. Such cases are when disclosure of information would expose the beneficial owner to disproportionate risk of fraud, kidnapping, blackmail, extortion, harassment violence or intimidation or when the beneficial owner is a minor or legally incompetent.

It is understood that such exemptions do not apply to credit and financial institutions nor the Supervisory Authorities, Unit, Customs and Excise Department, Tax Department and Police.

Timeframe:

The initial obligation to submit an application for registration of a trust was within six months from the date of publication of CySEC’s Directive. However, it is expected for further extension to be given from CySEC for such submissions.

IMPLEMENTATION OF THE BENEFICIAL OWNERSHIP REGISTER

On July of 2018 the 5th Anti-Money Laundering EU Directive (the “Directive”) came into full effect to update the legal framework of European Union related to anti-money laundering within the Cypriot legal order. The creation of a publicly accessible Ultimate Beneficial Owner (“UBO”) Register along with a register for Trusts and cryptocurrencies are some of the main policy updates of the Directive.  

On 23 February 2021, the Republic of Cyprus announced that the Directive has been transported into Cyprus Legislation through the Prevention and Suppression of Money Laundering Activities Laws of 2017-2021 (hereinafter “the Law”), with effect as of 16 March 2021. Therefore, the Department of Registrar of Companies and Official Receiver created and made available the Beneficial Owner Register (hereinafter “BO Register”) to legal entities to enter the details of their ultimate beneficial owners (UBOs).

The Law now stipulates that each entity is obliged to identify and record electronically on the BO Register all relevant information of the beneficial owner/s who own or control an entity. This applies to all legal entities regardless of their business, nature or field service and the range encompasses anything from service provider entities, or shops or even shelf companies.

Exemptions:

However, there are certain exemptions such as in respect of (i) companies whose process of liquidation has been enacted before the commencement of the Directive or (ii) for which an application for strike off has been submitted prior that date (iii) for overseas companies and (iv) companies that are listed on a regulated market that is subject to disclosure requirements consistent with Union law are not obliged to submit the details of their ultimate beneficial owners (UBOs).

Who is the Beneficial Owner?

The term “Beneficial Owner”, according to the Law, refers to any natural person who ultimately owns or controls a legal entity through direct or indirect ownership of a sufficient percentage of the shares or voting rights or ownership interest in that entity. The sufficient percentage is defined to mean 25% plus one share or ownership interest or voting right.

In cases where none of the shareholders exceeds the 25% plus one threshold or where there is doubt as to who is the beneficial owner, there is the option to declare the natural person who holds the position of a senior managing official, by declaring whether is a director or whether holds another position in the company. In such cases, the legal entity is obliged to keep records of the actions taken to identify the beneficial ownership, when requested.

Other notable points concerning the BO Register include the following: –

Information that shall be submitted:

The legal entity and its officers have the obligation to submit accurate and true information to the BO Register. The required details that shall be submitted are the following:

  • Name, surname, date of birth, nationality and residential address
  • Nature and extent of the beneficial interest held directly or indirectly by each beneficial owner, including through percentage of shares, voting rights, or the nature and extend of the Significant influence or control with other means exercised by each controlling person
  • ID or Passport number and the country of document issuance
  • Date on which the natural person was entered in the register as beneficial owner
  • Date of any changes or which the natural person ceased to be a beneficial owner 

Who has access to this information:

  • Competent Supervisory Authorities, the Financial Intelligent Unit (“FIU”), the Customs Department, the Tax Department and the Police. Competent Authorities have fast and unlimited access upon submission of an application without the submission of a fee and notifying the Entity.
  • Obliged entities, in the context of conducting due diligence and identification measures for the client. They have access to the name, month and year of birth, nationality and country of residence of the BO, as well as to the nature and extent of the beneficial interest held. Access is allowed following the payment of 3,50 euro per entity, as from the end of interim solution period.
  • Public will have access to the name, month and year of birth, nationality and country of residence of the BO, as well as to the nature and extent of the beneficial interest held. Access is allowed following the payment of 3,50 euro per entity, as from the end of interim solution period.

As an interim solution to facilitate a smooth implementation of the register, the period for the submission of the data of UBOs has been extended until 12/03/2022 according to the amending directive recently issued by the Registrar of Companies. During this period, the UBO related information will only be available to Competent Authorities and the public will not have access prior the final solution.

Further, the Law states that entities that refuse, omit or neglect to fulfill their obligations by 12/03/2022 will be liable to a penalty of up to €20.000.

Finally, this development further illustrates Cyprus’ full commitment to complying with all local and European regulations on international business structuring and channeling of investments. Cyprus has adopted a best practice approach by aligning its laws, regulations and business practices with those of other reputable international business jurisdictions in an effort to encourage and promote the facilitation of international business transactions and cross-border investments in a fully transparent, compliant and professionally prudent manner.

For any questions or further information on this development you can contact Panagiota Rousou at panagiota@landaslaw.com.

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