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The long awaited UBO-register requirement is now a reality in Cyprus.
In an exemplary attempt to restrain the negative effects of money laundering and terrorist financing, the Government of Cyprus has taken further steps to increase transparency in all transactions taking place within the country. By the decision of the Council of Ministers (16/12/2020) to transpose the 5th Anti-Money Laundering Directive (AMLD) at a national level they have implemented the central registry of ultimate beneficial owners (“UBO”). This registry is set to contain detailed information on the natural persons who ultimately own or control a legal entity.
Under this transposition of the Directive at a national level, the Council of Ministers also decided and passed into the law the following:
- The competent authority for maintaining the central register of ultimate beneficial owners (“UBO Register”) of Cyprus companies and other legal entities will be the Registrar of Companies and Official Receiver of the Ministry of Energy, Trade, and Industry; and
- The Registrar of Companies will be authorized to collect all necessary information about the ultimate beneficial owners and other legal entities through the interim system that has been developed.
The date of implementation of such data insertion had been set to the 18th of January 2021, but then postponed to the 16th of March 2021. A grace period of six (6) months has been given for such submission.
Every company or any other legal entity incorporated in Cyprus shall be required to maintain adequate information on its beneficial owner(s) within the UBO Register. The UBO Register is a system devised to provide transparency and a stable and updated database. The main goal is to have a clear and true understanding, on behalf of whom transactions are taking place.
However, at this stage the provisions of the Law do not explicitly refer to the information that should be entered into the register. As per the definition of the Law, a UBO is defined as a natural person who has the ultimate control or ultimate ownership in a company.
A further explanation as to the definition of UBO is given as follows:
- Any physical person who ultimately owns or controls a legal entity through direct or indirect shareholding ownership of 25 per cent (25%) plus one share; or
- An ownership interest of more than 25 per cent (25%) in the customer of the company.
It is still unclear whether this definition will be applied in relation to the UBO registry, however, it can offer important preliminary guidance as to how the issue will be tackled and what definitions will be used to identify UBOs.
The information of the UBO Register in its current form will be accessible only by the competent supervisory authorities/regulators, such as, amongst others, the Police, Tax authorities, the Cyprus Bar Association, the Central Bank and the Cyprus Securities and Exchange Commission etc. The relevant supervisory authorities/regulators will have access to such information having a legitimate interest and upon submission of a formal request at the Registrar.
Ultimately, in its final form the registry is expected to be accessible to not only the competent supervisory but also to certain types of professionals who have a vested interest in completing thorough due diligence as required by the Anti-Money Laundering regulations, such as and not limited to lawyers, accountants and bankers.
With respect to the Trusts (Express or Constructive) and other types of legal arrangements, the UBO Register will be maintained by CySEC. In such cases, the legitimate interest should be governed by the law of the Member State where the Trustee is established or resides. The definition of legitimate interest shall be construed as a general concept and as a criterion for accessing beneficial ownership information in their national law.
All information regarding Beneficial Ownership is protected by strict data protection regulations and will only be accessed if it is deemed appropriate, judging by the merits of each case.
The implementation of these regulations is a sure sign that Cyprus is aiming high to create a stable and trustworthy business environment on which existing and new coming businesses can rely on. Through its steps forward, Cyprus can instil confidence even further and become a preferred destination for productive business activity.
The AGP team will be keeping up to date with all new progress regarding the matter and will announce any new developments accordingly.
Important update: On the 18th of February 2021, the Parliament passed the Law on the Prevention and Suppression of Money Laundering (Amending) Law of 2021.
The new provisions of the law under the 5th European Directive (EU 2018/843, May 30, 2018), harmonize and strengthen the existing framework to prevent and combat money laundering and terrorist financing.
The starting date for collection of data on Beneficiaries of companies and other legal entities is 16th of March 2021 . Within the next few days, there is planned issuance of information by the Registrar of Companies on the maintenance and operation of the register, also, an operation manual of the system has been developed for this purpose.
The information provided by AGP Law Firm is for general informational purposes only and should not be construed as professional or formal legal advice. You should not act or refrain from acting based on any information provided above without obtaining legal or other professional advice.
Should you have any questions please contact us.