Irish companies need to take heed of new EU anti-money laundering requirements

Last week saw the introduction of a new law on corporate transparency which has significant implications for Irish-based companies.

Irish companies are now required to maintain a register with details of their beneficial owners. Previously, companies were only required to maintain a register of their direct shareholders. In a lot of cases existing shareholder registers show shares of a Company 'A' being held by a Company 'B'. The shares in Company 'B' may be held by a Company 'C' and so on.

By creating a complex web of corporate ownership the people who ultimately own and control corporate entities can be difficult to identify. The new legislation will force directors of Irish-based companies to investigate and identify those natural persons who own and control their companies and maintain that information on a register.

The regulations represent a first step in Ireland's transposition of the EU's fourth anti-money laundering directive, which aims to increase the transparency of corporate ownership in order to combat money laundering, terrorist financing and tax evasion.

Companies are required by the regulations to take all reasonable steps to obtain and hold accurate and current information on their beneficial owners.

As part of bringing the directive into Irish law, a new central register of corporate beneficial ownership will be created in Ireland. The information held by Irish companies will be stored, and be accessible to regulatory authorities.

The Government held a public consultation earlier this year on the extent to which a central Irish register of beneficial ownership should be accessible by the public.

The result of that consultation has not yet been published but ultimately the matter may be forced at EU level with an amendment to the EU directive expected to include a requirement that registers be capable of public inspection. This has attracted some controversy due to privacy and confidentiality concerns.

A publicly accessible register of trusts in France was ruled unconstitutional in a recent decision of the French Constitutional Council, which held that both the public nature of the register and the register itself fell foul of constitutional privacy protections. Similar challenges may await publicly accessible registers in other EU jurisdictions.

Directors of Irish companies will need to take steps to establish a beneficial ownership register and then populate it with the relevant information.

Directors will then need to consider what processes they will need to put in place to make sure information is kept up to date. Entities in specific industry sectors may find the requirements more of a challenge, like corporate fund vehicles whose beneficial owners change frequently.

Full transposition of the directive is expected mid-2017. We will need to wait for the draft transposing legislation to see how all the requirements on beneficial ownership will knit together.

From Irish Independent  (21/11/2016)