Pursuant to the Act on Counteracting Money Laundering and Terrorist Financing (“AML Act”), on October 13th, 2019 this year Poland will launch the Central Register of Beneficial Owners (“UBO Register”). This involves introduction of new obligations to commercial companies in respect of providing information to the UBO Register. The AML Act, implementing the Directive of the European Parliament and the Council 2015/849 (“4th AML Directive”) is a consequence of a loud international affair from 2015, known as the Panama Papers.
What is the purpose of the UBO Register?
According to the 4th AML Directive, all EU Member States are required to set up registers of beneficial owners, which will obtain and hold information on beneficial owners of commercial companies established under the law of a given country. Registers are one of many changes introduced by the 4th AML Directive, which aim to be a remedy for lack of transparency in the financial sector.
In Poland, the UBO Register will set off on October 13th, 2019. The obligation to submit information to the UBO Register will apply to the majority of commercial law companies, i.e. general partnerships, limited partnerships, limited joint-stock partnerships, limited liability companies and joint-stock companies.
The purpose of the UBO Registry is to disclose data of natural persons actually controlling a company. It is irrelevant how many legal entities are shareholders or partners in the structure. Beneficial owner whose data is to be disclosed is always a natural person. It does not matter if the natural person at the very top of the structure is a resident of Poland or has Polish citizenship.
The UBO Register will be free of charge and more importantly – public.
Old definition, new worries
For many years the obligation to verify natural persons, that actually control companies, remained on banks and other financial institutions. The necessity to disclose data of natural persons who, although formally rarely appear as direct or indirect shareholders of a company, yet exercise real control over its functioning, is not a novelty. However, all these sensitive data were not public and available to anyone regardless of their legal interest.
Pursuant to the AML Act definition, a beneficial owner is a natural person or natural persons controlling directly or indirectly a company through their rights which arise from legal or factual circumstances and enable them to exert decisive influence over the actions or activities undertaken by the company.
In the case of legal persons a beneficial owner is:
- a natural person who is a shareholder or stockholder, entitled to an ownership of more than 25% of the total number of shares or stocks of a legal person;
- a natural person with more than 25% of the total number of votes in the company’s decision-making body, also as a pledgee or a user or on the basis of agreements with other persons entitled to vote;
- a natural person exercising control over a legal person or legal persons who jointly have the right of ownership of more than 25% of the total number of shares in the company, or jointly holding more than 25% of the total number of votes in the company’s body, also as a pledgee or a user, or on the basis of agreements with other persons entitled to vote;
- a natural person exercising control over the entity through a dominant position, in the meaning of the Accounting Act, in relation to that legal person.
Who will have to deliver information?
The AML Act obliges the following entities to report:
- general partnerships,
- limited partnerships,
- limited joint-stock partnerships,
- limited liability companies,
- joint-stock companies.
The exception will be public companies within the meaning of the Act of July 29th, 2005 on Public Offering, Conditions Governing the Introduction of Financial Instruments to Organized Trading, and Public Companies.
Information about a beneficial owner that will be disclosed include:
- name and surname;
- country of residence;
- Universal Electronic System for Civil Registration Number (PESEL) or date of birth;
- size and nature of the participation or on the rights of the beneficial owner.
The information will have to be submitted by a person authorized to represent the obliged entity via the UBO Register’s website.
The statement will be submitted under pain of criminal liability for making a false statement.
Deadline to report
Two deadlines have been introduced to report information to the UBO Register. The term depends on the time of entry of a given company into the National Court Register.
Companies already entered into the National Court Register at the time of launching the UBO Register, will have to submit the information by April 13th, 2020. New companies will have 7 days, from the date of entry into the National Court Register, to submit information. In addition, any changes to the submitted information should be reported within 7 days from that change to the UBO Register.
Failure to comply with the obligation to report the information to the UBO Register by the obliged entities within the time limit will be subject to a financial penalty up to PLN 1m (approximately € 250.000).
Access to information
Work on creating an ICT system, that will process the UBO Registry data, is currently in progress. It is not certain if the UBO Register will be launched within the date provided by the AML Act. Nonetheless, the obliged companies should prepare and start obtaining the necessary data about their beneficial owners.
Submitted information about beneficial owners will be available via the UBO Register’s website. Reporting as well as updating information will be also carried out via the ICT system.
Echo of the Panama Papers
Media scandal which took place in 2015 after disclosure of the Panama Papers drew attention to the aspect of transparency of legal entities. At that time the manner of abuse of corporate structures and offshore tax havens to carry out questionable transactions went public.
Introduction of the UBO Registry in Poland is an echo of the Panama Papers. Public access to data of natural persons actually controlling a given entity intends to increase the transparency of transactions and reveal the persons behind the complex structure veil. The idea of reporting beneficial owners seems to be right. However, there are doubts whether the transparency of the financial sector is not pursued at the expense of the privacy of natural persons. Such a regulation seems to be surprising, especially in GPDR era when personal data is highly protected and worth its weight in gold.