Deriving from EU Directive 2015/849, as amended by EU Directive 2018/843, Luxembourg has implemented a new law concerning the creation of a register of beneficial owners and a new disclosure obligation notably for most commercial companies. Any entity falling within the scope of this new law will have until 1 September 2019 to comply with it.
The purpose of the new law of 13 January 2019 creating a register of beneficial owners (the “Law”) is to transpose European anti-money-laundering legislation into Luxembourg law.
Under European legislation, Member States must ensure that corporate and other legal entities incorporated within their territory "obtain and hold adequate, accurate and current information on their beneficial ownership, including the details of the beneficial interests held” in a central register. The register should be made accessible to competent authorities and financial intelligence units without restriction, relevant entities within the framework of customer due diligence and any member of the general public.
The Luxembourg central register on beneficial owners (being officially abbreviated “RBE” in French, the “BO Register”) will be maintained by the “Groupement d’intérêt économique Luxembourg Business Registers”, which also manages the Luxembourg Trade and Companies’ Register. Both registers will however be held separately and operate under different rules.
In its preparatory phase, the Law raised several questions where the balance between data protection and the need for increased transparency was concerned, especially since Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018 widened the scope of those able to consult the register of beneficial owners from “any person or organisation that can demonstrate a legitimate interest” to “the general public”.
Entities subject to the Law must (i) gather adequate, accurate and current documented information on their beneficial owners and (ii) file that information and the related probative documents with the BO Register. The concerned entities shall also set up an internal file comprising said information and probative documents, which must be kept at its registered office.
The concerned entities must keep the information on their beneficial owners updated in their own internal file and at the BO Register. Filing with the BO Register must be done within 1 month after the concerned entities have become aware or should have become aware of an event or circumstance which requires filing with it.
Furthermore, the concerned entities must provide the information available at the BO Register, plus information about their legal owners, (i) to competent national authorities (e.g., prosecutor offices, cellule de renseignement financier, CSSF, Commissariat aux Assurances, tax authorities, etc.) upon their simple request within 3 days of such request, and (ii) to professionals subject to the anti-money laundering legislation (“AML”) (e.g., banks, professionals of the financial sector, notaries, lawyers, etc.) upon their motivated request in the context of client due diligence and within 3 days of such request, except for information under point 4), (v) and (vi) below, and except in case access to information has been restricted as exposed under point 5) below.
Beneficial owners, for their part, bear the obligation to provide adequate, accurate and current documented information on themselves to the concerned Luxembourg entities (but not directly to the BO Register).
The Law provides for criminal sanctions in case of violations.
Any entity subject to the Law can be fined between EUR 1,250 and EUR 1,250,000 if:
The same fine range applies to any beneficial owner subject to the Law failing to provide the above information to the concerned Luxembourg entities.
Entities required to collect and file information on their beneficial owners with the BO Register are the following:
Listed companies are only required to mention the name of the regulated market on which their shares/notes are admitted for trading.
The beneficial owner aimed at by the Law is that defined by Article 1, paragraph 7 of the AML law of 12 November 2004, as amended; the Law did not create a new or different definition of the “beneficial owner” than that already known and used in Luxembourg.
The beneficial owner subject to the provisions of the Law is “any natural person(s) who ultimately owns or controls the customer or any natural person(s) on whose behalf a transaction or activity is being conducted.”
For companies, this means “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, including through bearer shareholdings, or through control via other means, other than a company listed on a regulated market that is subject to disclosure requirements consistent with European Union law or subject to equivalent international standards which ensure adequate transparency of ownership information.”
The official (indicative) threshold is a shareholding of 25% plus one share or an ownership interest of more than 25% in the entity held by the same person.
If no person is identified as beneficial owner after having exhausted all possible means or there is a doubt as to who are the beneficial owners, any natural person holding senior management positions will be considered as beneficial owner (i.e., directors, managers or executive officers).
The AML law also provides examples of beneficial owners for fiduciaries, trusts, foundations and legal arrangements similar to trusts, not exposed in detail herein.
The following information must be provided to the BO Register, regarding the beneficial owners of the concerned entities:
This information must be correct, complete and current/kept up-to-date.
The BO Register is accessible online will upon request provide an electronic or hardcopy excerpt with the relevant information.
National authorities involved in the fight against money laundering and terrorism financing (e.g., tax authorities, CSSF, CAA, public prosecutor, etc.) have access to all of the information held with the BO Register.
The general public has access to the first and last name, nationality, date and place of birth and country of residence of the beneficial owner, as well as to the nature and extent of the beneficial interest held.
The Law provides that the beneficial owner and the concerned entity may, through a motivated request, in exceptional circumstances to be determined on a case-by-case basis, request that access to information contained in the register be restricted only to the national authorities, banks and financial institutions, process servers and notaries performing their duties, if access by the general public could expose the beneficial owner to a disproportionate risk, risk of fraud, kidnapping, blackmail, extortion, harassment, violence or intimidation or if the beneficial owner is a minor or otherwise incapacitated. Upon receipt of the request, the BO Register’s manager will immediately block access to the general public as a provisional and precautionary measure. If the access restriction is granted for good, then it is limited to a maximum period of three years, renewable in case the asserted exceptional circumstances still subsist.
The Law will enter into force on the first day of the second month following its publication in the Official Gazette Mémorial. Concerned entities will have a six-month moratorium in order to comply with the Law and collect and transfer the necessary information on their beneficial owners to the new BO Register (all the while maintaining a copy at their registered office).
From a practical standpoint, the Law will take effect on 1 March 2019 and concerned entities will have until 1 September 2019 to comply.