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The UBO register is on its way; worrying: abuse of anti-abuse legislation?

The UBO register is on its way; worrying: abuse of anti-abuse legislation?

On grounds of the Money Laundering and Terrorist Financing (Prevention) Act (Wwft), a civil-law notary must first confirm a client’s identity in accordance with this law or have this confirmed before providing a service to this client or executing a notarial deed. A consequence of this requirement is that a Dutch civil-law notary must ask you to visit a notary’s office at a moment convenient to you (but before the provision of a service and no later than before a notarial deed is executed) to complete and sign a so-called UBO statement before a civil-law notary or his/her deputy. This document is stored in the dossier and remains confidential, unless, for example, the Financial Supervision Office (the regulator for the notarial profession) or the FIU-Nederland (Netherlands Financial Intelligence Unit) starts an investigation into the particular civil-law notary or client (possibly in follow-up to a Wwft notification). This identity confirmation is aimed at preventing a person who is up to no good from being able to hide behind a web of undertakings.

In an earlier article, I reported that on 20 May 2015, the European Parliament adopted the new anti-money laundering directive, the ‘AMLD4’. One of the (far-reaching) effects of this is that every member state must introduce a so-called UBO register. Because the directive must be implemented by the member states before 26 June 2017, this may seem far off and not terribly concrete, but there is still reason for concern.

A UBO is:

  1. a natural person who holds a stake of more than 25% of the capital interest or can exercise more than 25% of the voting rights in the meeting of shareholders of a legal entity other than a foundation, or can exercise actual control in this legal entity in some other way (unless this legal entity is a listed company);
  2. a beneficiary of 25% or more of the assets of a foundation or trust or the person who has special control over 25% or more of the assets of a foundation or trust.

It emerges from the AMLD4 that all UBOs will be required to identify themselves and be registered in the so-called UBO register. In all likelihood, as is the case with the future central shareholders’ register, the UBO register will also be kept by the Chamber of Commerce. The UBO register will be able to be accessed by government agencies and financial intelligence units, entities that fall under the reporting requirement in the context of client investigation provided for in the Wwft (which includes lawyers and civil-law notaries) and persons and organisations that can demonstrate a ‘legitimate interest’ in bringing possible money laundering practices, terrorism financing or corruption and tax or other fraud to light.

It must also be looked into whether, when the UBO is identified, he/she emerges to be a ‘PEP’ (Politically Exposed Person): a person who because of his/her profession or position (or that of a spouse or close relative) is extra sensitive to blackmail, bribery and the like.

However, it seems as if the security and privacy aspects of the UBO have been entirely overlooked: although provisions have been included concerning various privacy aspects, it seems as if no further attention has (yet) been devoted to how these parties must deal ethically with the information obtained. In view of the large group that has access to the register (in particular the group which can demonstrate legitimate interest), (adequate) regulation in these areas is indeed necessary.

The VNO-NCW and MKB Nederland, for example, are very concerned about these security and privacy aspects of the UBO register . In a letter to ministers Kamp (Economic Affairs) and Van der Steur (Security and Justice), they expressed their deep concern about the consequences for family businesses, whereby there is predominantly fear ‘for the personal liberty of family members (kidnapping), blackmail, and undesired mention on millionaire lists’.

On the one hand, the UBO register could ensure more efficient service provision, with the focus once again returning to actual service provision instead of investigation into UBOs and PEPs. It may also help clients facing increasing demands from countries in all regions of the world these days in which (financial) service providers are also tightening up and expanding the rules of supervision and identification (the famous ‘KYC’ principle: ‘know your customer’). Along with this, however, it is precisely the focus in the anti-money laundering regulations on UBOs and PEPs and the identification of these individuals (provided they have a direct or indirect stake or control of more than 25%) which make them in fact extra vulnerable. It is therefore up to the legislator to carefully weigh both interests.

For the rest, the UBO register can be distinguished from the central shareholders’ register. Naturally, we will be following the developments in this area with interest; as soon as there is more to report, we will inform you about it on legalknowledge.com.

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