INTRODUCTION:
The Directive (EU) 2015/849 of the European Parliament and of the Council of 20th of May 2015, on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, otherwise called the 4th Anti-Money Laundering Directive (hereinafter “the Directive”), provided for a two-year window for implementation by all EU member states.
Following the provisions of the Directive, the Republic of Cyprus enacted on 3rd of April 2018, the Prevention and Suppression of Money Laundering Activities (amendment) Law of 2018 (hereinafter “the Law”) which transpose the provisions of the Directive into national legislation.
IMPORTANT CHANGES:
Beneficial owners:
According to the definition of the Beneficial owner under the new Law, beneficial owner means:
Natural person who has the final ownership or control to the client and/or the natural person for whom the transaction or the activity is carried out and includes at least the following persons:
- a) in respect of a legal person –
(i) the natural person having the final ownership or ultimate control of the legal person, either directly or indirectly in a sufficient percentage of the shares or voting rights or of the ownership right of that legal entity through, inter alia, shares in:
- bearer or
- by other means of control other than listed company on a regulated market, which
is subject to disclosure requirements according to legislation of the European Union or subject to equivalent international standards which they ensure sufficient transparency of information about beneficial owner.
It is provided that:
(a) an indication of direct ownership constitutes
Twenty-five percent participation (25%) plus a (1) share or ownership right over twenty five percent (25%) to the client held by a natural person, and
(b) an indication of indirect ownership constitutes
Twenty-five percent participation (25%) plus a (1) share or ownership right over twenty five percent (25%) to a client held by a legal entity, who is under the control of a natural person or persons or by many legal entities which are under the control of the same natural person or persons.
(ii) the natural person holding a senior manager position in case if, after exhausting all possible means and on condition that there are no valid suspicions, no person is identified under the provisions of subparagraph (i) of this paragraph or if there is any doubt that the person who was identified is indeed the beneficial owner:
It is provided that an obliged entity* holds a file to document all actions undertaken in accordance with the provisions of subparagraphs (i) and (ii);
*The term Obliged entities (Υπόχρεες οντότητες) under paragraph 2A of the Law includes the following entities:
(a) Credit institution;
(b) a financial institution;
(c) any of the following physical or legal persons in the exercise of their professional activities:
(i) auditor, external accountant and tax advisor
(ii) an independent professional lawyer, when involved, either acting in the name and on behalf of a client in the context of a financial transaction or transaction on immovable property, or by helping designing or executing a customer transaction
about –
(aa) the purchase and sale of immovable property; or business,
(bb) managing money, securities or other assets of his client
(cc) the opening or management of a bank account, savings account or securities,
(dd) the arrangement of the necessary contributions to the establishment, operation or management of a company,
(ee) the establishment, operation or administration of a trust, enterprise, foundation or similar scheme;
(d) a natural or legal person not included in referred to in paragraph (c) persons and provides the following services to trusts or businesses:
(i) Establishment of companies or other legal entities;
(ii) providing services of a director or secretary of a company, a member of a partnership or holder of a similar position or with other legal entities or legal mechanisms under which another person can exercise such duties accordingly·
(iii) providing registered office address, business, postal or administrative address and any other relevant information services for a company, a personal company or any other legal person or legal mechanism;
(iv) exercising, directly or through another person, trustee or commissioner’s duties trust trusts or similar legal arrangement·
(v) holding shares of legal persons and registration of the holder in the relevant registers of shareholders on behalf of third parties, other than a company listed in a regulated entity market which is subject to disclosure requirements under the law of the European Union or is subject to equivalent international standards, or cares other person to perform such duties;
(vi) any of the services or activities laid down in Article 4 of the Regulation of
Administrative Service Providers and Related Matters Law;
(e) real estate agents;
(f) gambling service providers such as provided for in the relevant laws of the Republic.
Registry of Beneficial owners
According to the paragraph 61A (1), a company and other legal entity established in the Republic, must obtain and keep accurate and updated information with respect to the beneficial owners and their rights.
According to the paragraph 61A (4)(a) of the Law, the information mentioned above will be filed in a Central Registry of beneficial owners. Its characteristics and operation of the said Central Registry as well as securing legitimate access to this registry will be regulated with regulations that will be issued at a later stage.
According to 61A (6) of the law, the following persons have access, in any case,
to the information on the beneficial owners:
(a) The competent Supervisory Authority (i.e. Selk), the Unit (i.e. Mokas), the Customs Department, Tax Department and Police without restrictions;
(b) the obliged entities in the context of their due diligence and customer identification procedures
(c) a person or organization who can prove legal interest, as defined in Regulations pursuant to the provisions of this Article has access to the name, month and year birth, nationality and country of residence the beneficial owner, as well as the species and its extent of the rights it holds
The Law further provides:
(7) (a) The competent Supervisory Authority, the Unit, the Customs Department, the Department of Taxation and the Police have fast and unlimited access to the central register of beneficial owners referred to in subparagraph (4) without the need to notify the relevant companies and other legal entities about such access.
(7) (b) The obliged entities, have fast access to the central register of beneficial owners referred to in subparagraph (4) when they undertake due diligence and customer identification measures.
FINAL REMARKS:
Following the above, no further information is provided by the government authorities as to how and when the Central Registry of Beneficial Owners will be implemented and how access to it will be regulated. It is expected that the Registrar of Companies will develop relevant regulations which will be published in due course.