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Update: legislative proposal on registration of trusts’ UBOs

07 May 2020
Banking & Finance - Corporate Law

On 17 April the legislative proposal “Implementation act on the registration of ultimate beneficial owners of trusts and similar legal entities” (Implementatiewet registratie uiteindelijk belanghebbenden van trusts en soortgelijke juridische constructies) (the Legislative Proposal) was published for consultation. The Legislative Proposal implements the obligation to register information about ultimate beneficial owners (UBOs) of trusts and similar legal entities (hereinafter jointly referred to as trusts) in one central register into Dutch legislation. This registration obligation follows from the Fifth anti-money laundering Directive, Directive (EU) 2018/843 (AML5). For more information about AML5, we refer to our previous newsletter dated 3 September 2019.

The Legislative proposal amends the Dutch Money Laundering and Terrorist Financing Prevention Act (Wet ter voorkoming van witwassen en financieren van terrorisme) (the Wwft) and the Dutch Economic Offences Act (Wet op de economische delicten) (the Wed). In addition, it introduces a new act which implements the obligations in relation to the registration of trusts’ UBOs in the Netherlands (the Implementation Act).

In this newsletter we will discuss the background of the Legislative Proposal, the highlights of the Implementation Act and the most important amendments to current legislation.

Background

The AML5 obliges EU member states to ensure that trustees collect and maintain adequate, accurate and current information regarding the trusts’ UBOs. This includes – amongst others – the identity of the founder(s), trustee(s), protector(s) (if any), beneficiary(-ies), and other people who can exercise effective control (effectieve zeggenschap) in the trust. This information should (timely) be available for inter alia competent authorities, entities with a notification obligation (e.g. a bank) and the financial intelligence units, and should be collected and maintained in a central register of the EU member state in which the trustee is based (gevestigd is) or resides (woonachtig is). In the event that the trustee is based outside the European Union, the registration should be made within the EU member state in which the business relationship is concluded or in which real estate is acquired. Lastly, trustees must notify entities with a notification obligation whether they are acting as a trustee and they need to provide information regarding the identity of the trust’s UBO(s) to such entities. EU member states must sanction breaches of these obligations with effective, proportional and discouraging measures and sanctions.

The AML5 amends and extends the applicable provisions of previous EU directives in relation to trusts. For example, the obligation to register information (as explained above) has been extended and no longer solely applies to “express trusts”. Given the fact that Dutch legislation does not recognise this legal entity, earlier implementation of this obligation into Dutch legislation was not required. However, due to the amendments pursuant to the AML5, such implementation is now necessary.

Highlights Implementation Act

The Legislative Proposal implements a legal framework for the registration of trusts in one central register. The obligation to register information (as explained above) is included therein.

The Implementation Act introduces a central register for the registration of trusts and its’ UBOs (the Trust Register). From the Legislative Proposal’s explanation can be concluded that the Trust Register will be similar to the current Dutch UBO register. Paragraph 7 of the Legislative Proposal’s explanation states that the Trust Register’s administrator will be the Dutch Chamber of Commerce (which is also the Dutch UBO register’s administrator). For more information about the Dutch UBO register, we refer to our previous newsletter dated 19 December 2019.

In addition, the Implementation Act introduces – amongst others – the following obligations and provisions:

  • the trustee is obliged to register certain information regarding the trust (e.g. its name and the type of trust) in the Trust Register and to ensure that this information remains adequate, accurate and current;
  • the trustee is obliged to collect and maintain information regarding the trust’s UBO(s) and to register such information in the Trust Register and to ensure that this information remains adequate, accurate and current;
  • the information in the Trust Register must be available for anyone, however, anyone who would like to receive the information from the Trust Register must register him-/her-/itself online with the Trust Register’s administrator; and
  • in order to fulfil its obligations, the Financial Intelligence Unit can share the information from the Trust Register free of charge and in a timely manner with financial intelligence units of other EU member states.

Important amendment to current legislation

Several new provisions will be included in the Wwft in order to implement the Legislative Proposal’s obligations. The following obligations will (also) be included in the Wwft:

  • when entering into a business relationship or an incidental transaction, trustees must (i) notify a Wwft entity (Wwft-instelling) (which is an entity that falls under the scope of the Wwft, e.g. a bank) that they act as a trustee and (ii) provide information regarding the trusts’ UBOs to such Wwft entity;
  • the trustee must collect and maintain adequate, accurate and current information regarding the trust’s UBO(s); and
  • for the purpose of their client investigation (cliëntenonderzoek), Wwft entities are required to obtain an excerpt from the trust from the applicable central register (however, and just as with other legal entities, the Wwft entity still has to verify the information obtained and cannot solely rely on the excerpt, and any discrepancies between the Wwft entity’s findings and the excerpt must be notified).

The amendments to the Wed penalise any breaches of the obligations and provisions from the Implementation Act and the Wwft. If the information regarding a trust and its UBO(s) is not registered in time, this qualifies as an economic offence (economisch delict). Such an economic offence qualifies as a violation (overtreding) which can be punished with an imprisonment of up to six months, community service (taakstraf) or a fine of the fourth category (EUR 21,750 maximum).

In addition, a breach of several other obligations of the Legislative Proposal qualifies as a crime (misdrijf) in the event of intent (opzet). If there was no intent, such a breach qualifies as a violation. This concerns – for example – the obligation to collect and maintain adequate, accurate and current information regarding the trust’s UBO(s). In the event of a crime, this economic offence can be punished with an imprisonment of up to two years, community service or a fine of the fourth category. In the event of a violation, this economic offence can be punished with an imprisonment of up to six months, community service or a fine of the fourth category.

Further implementation

Up until 15 May, interested parties can submit their response to the Legislative Proposal. Please do not hesitate to contact our Banking & Finance team if you have any further questions regarding the consequences of the Legislative Proposal for you.