The notion of “beneficial ownership” will be introduced in Romanian legislation by the Law on money-laundering and terrorist financing (the “Law”), which will implement the single mechanism for the prevention of money-laundering and terrorist financing. This mechanism is provided by Directive (EU) 2015/849 of the European Parliament and Council of 20 May 2015 regarding the prevention of use of the financial system for money-laundering and terrorist financing, to amend Regulation (EU) no.648/2012 of the European Parliament and Council and to annul Directive 2005/60/CE of the European Parliament and Council and Directive 2006/70/CE of the Commission (“4 AML Directive”), which should have been transposed into Romanian law by 26 June 2017.
According to the Law, a beneficial owner is any private person who owns or ultimately controls an entity and / or a private person on whose behalf a transaction, an operation or an activity is performed, directly or indirectly.
Within the meaning of the Law, the notion of “beneficial owner” appears to be significantly extended, considering private persons (not legal persons) who control an entity by exercising an effective control over it, regardless of whether such person is or is not recorded in the entity’s registries as having powers of decision. We believe that this definition envisages effective controlling (directing) influence over the client, even if that private person does not appear as associate/ shareholder in the client.
What is the scope of the Register?
Firstly, the Law stipulates the creation of four different registers:
- the central register held by the National Office of Commercial Registry for companies;
- the register held by the Ministry of Justice for associations and foundations;
- the central register held by the National Agency for Fiscal Administration for trusts; and
- the central register organised at the level of the Central Depositary for the companies listed on the regulated markets.
Due to the fact that all four registers have the same scope, for ease of reference, we use the term “Register” in this paper. Any reference to a “Register” must be interpreted in relation to all four registers.
The Register is created to ensure transparency and to prevent the inadequate use of corporate assets as a whole. It is accessible exclusively to “reporting entities” as defined by article 5 of the Law, to the competent authorities and to the National Office for Prevention of Money-Laundering. The Register must comprise adequate and accurate information, published in due time. We consider that the wording “in due time” should include the following:
- the obligation of reporting entities to register the information within a reasonable time (e.g. we would suggest 3 days as of the date of occurrence of the changes impacting the beneficial owner) and
- the obligation of the holder of the register to disclose the relevant information to the reporting entities within a reasonable time (e.g. we would suggest 24 hours as of the request formulated by the reporting entities).
The Register must not be seen as eliminating an extensive due diligence process regarding a company / group of companies. The Register must be seen as an instrument available to Romanian and European authorities and to the reporting entities with a view to preventing the use of corporate assets for the purpose of preventing money-laundering and terrorist financing, as well as other economic crimes. According to article 18 (par 7) of the Law, the identification of the beneficial owner implies the fact that all reporting entities must perform risk analyses.
Is the Register a simple “depositary” of information on the beneficial owner or does it check the information published?
The methodology regarding the functioning of the Register is not yet available. Taking into account the scope thereof, we consider that the holder thereof must verify the information supplied and to apply sanctions in case the information is inadequate or inaccurate or provided late. It is desirable that secondary legislation should clarify the role of the Register so that the scope thereof is attained.
Transparency is one of the principles of a coherent and sustainable business, and by the creation and implementation of such Register, a series of high expectations are imposed in respect of a careful evaluation of risks derived from a wide due-diligence process on business partners. In this respect, we consider that the biggest challenge will be to reduce the gap between the due diligence as it is currently carried out on the identification of beneficial owners and the due diligence process which is needed to satisfy the obligations imposed by the Law and to the Directive to identify beneficial owners.