In this article Chris Butler, Head of Operations at Mercator® by Citco, discusses the principles that you can follow to help you to manage your company / multinational corporation UBO compliance efficiently
Ultimate Beneficial Ownership (UBO) compliance has been one of the prevailing topics for policymakers and governments over the last decade. While for lawmakers, it is still a field for further discussion, companies in different jurisdictions are required to be compliant with the UBO laws already set out.
There are several principles that you can follow to help you to manage your company / multinational corporation UBO compliance efficiently, though the prism of recent UBO developments worldwide:
Diversity is a key description of UBO regulations worldwide. While driven by the same principle of increasing transparency, the main definitions and applicable rules and procedures vary from jurisdiction to jurisdiction. For example, in the United Arab Emirates, a unified requirement to file the Registers of Real Beneficiaries and Partners or Shareholders was introduced and applied for all commercial Free Zones in August 2020. However, the Free Zones determine the filing procedure separately, as well as UBO data filed differing in each zone.
It would, therefore, not be possible to identify the beneficial owner for all relevant entities using only one rule. Due to the diversity of laws applicable, the process of ascertaining, proving and filing of beneficial ownership information will be different in each jurisdiction (even if the beneficial owner reported is the same).
Generally, each jurisdiction may opt-in to the requirement for a company to a) ascertain the beneficial owner(s) and keep this information in an up-to-date state internally, and/or b) ascertain the beneficial owner(s) and file this information with the relevant authorities. For example, From 8 July 2020, legal entities incorporated or founded in the Netherlands must obtain information on their UBO(s). On 27 September 2020, the Dutch Senate approved the law, which requires legal entities incorporated in the Netherlands (including legal persons and arrangements) to report UBO information within eighteen (18) months to the Chamber of Commerce, i.e. by 22 March 2022.
Most recently, on 1 November 2021, the new Act on the register of beneficial owners came into force in Norway, requiring the relevant Norwegian entities to identify their UBOs, properly document the identification and keep the UBO information/paper trail showing that there is no UBO, internally. For now, regulations regarding UBO registration with local authorities are yet to be implemented.
A similar requirement for keeping up-to-date information internally has been introduced in various jurisdictions (Ireland, Pakistan, etc.); however, companies often neglect it and focus only on the filing requirement. For that, the consequences could be severe. In Malaysia, failure to comply with above-stated framework in general (i.e. including requirement a)) may lead to administrative penalties or imprisonment. Thus, it is important to approach UBO compliance comprehensively and comply with each requirement fully.
It is also worth mentioning that any corporate-related change should be fully evaluated with regards to UBO compliance. Board changes, director’s particulars change, transfer of shares, shareholder’s particular change, etc., shall be followed by the update of the internal UBO register/file or reporting to authorities in some jurisdictions. Therefore, a comprehensive evaluation is essential.
As with any other legislation, UBO reporting requirements remain ‘movable’ even after being set. Sometimes it is to ease compliance with the applicable rules and procedures, such as the development of UBO reporting procedures in Austria, where it is now possible to file board changes and update beneficial owner information simultaneously (applicable for companies with management being registered as beneficial owners).
After UBO disclosure requirements have been in force for a while, it is natural that regulators develop the legislation with further clarifications to the identification of beneficial owners, improve existing reporting procedures and change the ones which are not working in practice. From the companies’ perspective, it is extremely important to keep an eye on these developments and comply with those in time.
While dealing with UBO compliance, it is often required to look beyond the corporate-secretarial perspective. For example, in Colombia, the UBO reporting requirement is laid down within tax regulations, and companies need to cooperate with their tax advisors in order to comply with the requirements set out by resolutions of DIAN (Colombian Tax Office). The regulations are being issued on an annual basis and provide updated rules, procedures and deadlines for each accounting period.
Looking at the recently introduced UBO reporting requirements, it is obvious that regulators are looking for enhanced transparency, including cases when no actual UBO can be identified. For example, in 2020, legislators in Albania, Malaysia, Mauritius, Kenya and other jurisdictions introduced the requirement to disclose details of the officials of the ultimate owning company in situations when no other natural person can be identified as the actual UBO. While complying with such a requirement remains painful for many multinational corporations, it is quickly becoming a new legal reality. Hence, being transparent in terms of beneficial ownership reporting is one more principle to follow.
In conclusion, there is one important note to mention. Among all the UBO rules to be compliant with, not all are new ones, and some of them have already been in place for quite some time. For example, maintenance of a register of persons with significant control in the United Kingdom and filing of the list of foreign shareholders in Ecuador are well-established obligations and yet are equivalent to beneficial ownership requirements in their respective jurisdictions. Hence, no additional actions are required from companies there.
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