CATEGORY: CYPRUS LEGAL SYSTEM
On 20 May 2015, the European Council issued the Directive (EU) 2015/849 (the “4th AML Directive”). The 4th AML Directive required Member States to establish a register of the ultimate beneficial owners of obliged legal entities within their respective jurisdictions.
In 2018, the EU council issued the Directive (EU) 2018/843 amending the 4th AML (the “5th AML Directive”). Pursuant to the amended provisions, EU Member States are obliged to launch publicly accessible registers containing details as to the beneficial ownership of companies and other legal entities such as trusts.
The 5th AML Directive was transposed into national legislation via the enforcement of the Prevention and Suppression of Money Laundering and Terrorist Financing Law of 2007 to 2021 (the “Law”), on 23 February 2021. The Law provides for the establishment and maintenance of a publicly available national central register of ultimate beneficial owners for companies and other legal entities (the “National Central Register of UBOs”), containing detailed information regarding the beneficial ownership and control of the obliged legal entities falling within the scope of the Law.
Definition of Ultimate Beneficial Owners
According to section 2(1) of the Law, the term Ultimate Beneficial Owner (UBO) is defined as any natural person or persons who ultimately own or control a company or other legal entity and/or the natural person or persons on whose behalf transactions and/or activities are being conducted and include at least:
(a) in the case of corporate entities:
(i) the natural person or persons who ultimately own or control a legal entity through direct or indirect ownership of a sufficient percentage of the shares or voting rights or ownership interest in that entity, including through bearer shareholdings, or through control via other means, other than a company listed on a regulated market which is subjected to disclosure requirements compatible with the EU law or subject to equivalent international standards which ensure adequate transparency of ownership information.
It is noted that a shareholding of 25% plus one share or an ownership interest of more than 25% in the corporate entity held by a natural person shall be an indication of direct ownership. A shareholding of 25% plus one share or an ownership interest of more than 25% in the customer entity held by another corporate entity which is under the control of a natural person(s), or by multiple other corporate entities, which are under the control of the same natural person or persons, shall be an indication of indirect ownership.
(iii) if, after having exhausted all possible means and as long as there are no grounds for suspicion, no person under point (i) is identified, or if there is any doubt that the person or persons identified are the beneficial owner(s), the natural person(s) who hold the position of senior managing official(s),
It is noted that the obliged entities are under an obligation to maintain records of the actions taken to identify the beneficial owners.
(b) in the case of Trusts:
(i) the trustee(s);
(ii) the settlor;
(iii) the beneficiaries. If the persons benefiting from the legal arrangement have not been determined yet, the class of persons in whose interest the legal arrangement or entity is set up or operates;
(iv) the protector, if any;
(v) any other natural person exercising ultimate control over the trust through direct or indirect ownership or via other means;
(c) in the case of other legal entities including, inter alia, foundations and other legal arrangements like trusts, the natural person or persons holding equivalent or similar positions to those referred to in point (b) above.
The Directive issued by the Department of the Registrar of Companies and Intellectual Property regarding the National Central Register of Ultimate Beneficial Owners (UBOs) of Companies and other Legal Entities (the “Directive”) provides that the details and/or information of the beneficial owners of the obliged legal entities must be submitted electronically.
The obliged entities for which the details and/or information pertaining to their beneficial ownership must be submitted are the following:
It is noted that the aforementioned Directive does not apply to the entities mentioned below:
Information to be filed with the National Central Register of UBOs
The following information and details pertaining to each natural person that is a UBO of a corporate entity must be filed with the National Central Register of UBOs:
Currently, where the structure of a legal entity registered in the Republic of Cyprus, leads to Trust/s, Foundation/s, other similar legal arrangements or listed companies, the following information and/or details must be filed:
If no physical person can be identified as the UBO based on the ownership structure and rights of the legal entity or where there is doubt that the person identified is the actual UBO thereof, the senior management official’s information and details shall be filed with the National Central Register of UBOs, stating whether the person is a director in the company or whether he/she holds any other position in the legal entity. In such cases, the nature and extent of the beneficial interest is not submitted on the system. The obligation and responsibility for the filing of information is on the legal entity and the officials thereof.
Accessibility to the National Central Register of UBOs
The electronic National Central Register of UBOs shall be accessible by the following authorities and persons:
As of the date of establishment of the National Central Register of UBOs (i.e. 12/03/2021) until the 31/07/2022, on which the electronic National Central Register of UBOs will become fully operative, access to the information and details of the UBOs will be granted only to Competent Supervisory Authorities, the FIUs, the Police, the Tax Department and the Customs Department, upon submitting a written request to the Registrar of Companies.
Timing of filings (Deadlines)
Each and every obliged entity mentioned above shall proceed with the filing of the necessary information and details pertaining to the beneficial ownership thereof prior to the expiration of the interim solution period, which is extended until the 31st day of July, 2022.
In the event where there was a change of the details of the existing UBO(s) of an obliged entity or where the obliged entity decided to proceed with the change of its UBO(s), the entity and its officers are under an obligation to proceed with the filing of the details of the new UBO(s) with the National Central Register of UBOs within 14 (Fourteen) days from the date such change occurred.
In regard to newly incorporated obliged legal entities that were registered after the 12th day of March, 2021, the company and its officers shall proceed with the filing of the necessary information and details pertaining to the beneficial ownership thereof within 30 (Thirty) days as of their date of incorporation.
The filing of the necessary information and details pertaining to the beneficial ownership of obliged legal entities is possible via the Government Gateway Portal Ariadni (“Ariadni”), in one of the following manners:
Consequences of non-compliance
It shall be emphasised that strict and penalties and fines may be imposed on obliged legal entities and the officers thereof in cases of non-compliance with the provisions of the Law, the AML Directives and/or the Directive issued by the Department of Registrar of Companies and Intellectual Property.
More specifically, both the obliged entity and each of its officers will be subject to a penalty in the amount of €200,00 (Two Hundred Euros) and, in case the default continues, an additional amount of €100,00 (One Hundred Euros) will be imposed upon them for each additional day of delay with a cap penalty in the amount of €20.000,00 (Twenty Thousand Euros).
It shall be noted that the aforementioned penalties and fines will apply post the expiration of the interim solution period, namely after the 31st day of July, 2022, as during the aforesaid interim solution period (grace period) no penalties and/or fines will be imposed upon obliged entities and their officers.