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.
