We already mentioned it in our update of 3 June 2015: the intended establishment of a register containing information regarding the ultimate beneficial owners of organizations (the “UBO-register”). The UBO-register is one of the measures proposed in the
Fourth Anti Money Laundering Directive (the “ Directive”), adopted on 20 May 2015.
One of the characteristics of a European Directive is that it needs to be implemented in the legislation of each individual Member State. In the Netherlands, the legislative proposal for the Implementation Act Registration of Ultimate Beneficial Owners (the “
In this update, we discuss the legislative proposal and the foremost points of critique that have come up during the internet consultation.
Who is the UBO?
According to the Dutch Tax Authorities, the ultimate beneficial owner is the individual who:
- has an interest of over 25% in the capital of the legal entity;
- has over 25% of the voting rights in the general meeting of shareholders of that legal entity; or
- is the beneficiary to over 25% of the capital of the legal entity.
In the draft Implementation Act, the UBO is defined as follows: “the individual who is the ultimate owner of or has ultimate say over a company or legal entity” (“de natuurlijke persoon die de uiteindelijke eigenaar is van of zeggenschap heeft over een onderneming of rechtspersoon”). It is notable that the draft Implementation Act does not specify under which circumstances an individual qualifies as an UBO. In the clarification to the draft Implementation Act, the government explains that it intends to lay down the exact percentages for an UBO per type of organisation or legal entity in the (amended)
Who has to register?
On the day the Implementation Act enters into force, a transition period of one and a half years commences during which organizations have the opportunity to provide the register with the correct information. If n organization does not act in accordance with the obligation to register, such will be considered an economic offence. Moreover, those institutions that are subject to the Act on the prevention of money laundering and financing of terrorism (Wet ter voorkoming van witwassen en financiering van terrorisme, “Wwft”), so-called Wwft-institutions, are required to report to the Chamber of Commerce if they have grounds to doubt the information registered on behalf of their client. Examples of Wwft-institutions are, for example, banks, insurance companies, but also attorneys and civil notaries. This obligation is described as the ‘reporting duty’ (terugmeldingsplicht).
What is registered and who has access to it?
The UBO-register will become part of the commercial register of the Chamber of Commerce and will, like the commercial register, be (partly) accessible to the public. The following information will be included in the publicly accessible part of the UBO-register:
- month and year of birth;
- city of residence;
- type and size of the relevant interest. From a privacy perspective, the interest will only be indicated as a bandwidth. No exact percentages are registered.
In addition to the publicly accessible part, the UBO-register will also contain information that will only be accessible by the relevant authorities. Such applies to the social security number of the UBO or the foreign equivalent thereof, the place of birth and the current address.
Critique on the draft Implementation Act
The internet consultation brought several issues with the draft Implementation Act to light. Ovidius discusses three main points of critique that featured in most of the responses:
- Definitions are included in lower legislation instead of in the Implementation Act. Several essential definitions relevant to the UBO-register are not included or defined in the draft Implementation Act itself, but will be laid down in lower legislation. As a result, these definitions will not be reviewed by the Dutch House of Representatives or the Senate. The most important example is the definition of ‘ultimate beneficial owner’, which will be laid down in the (amended)
Commercial Register Decision 2008(Handelsregisterbesluit 2008). It is unclear why the definition that determines the scope of the Implementation Act, is not included in said Implementation Act.
- Public accessibility of the UBO-register. The Dutch legislator has opted to make certain information publicly accessible. As a result, the proposed scope Implementation Act goes further therein than that of the Directive does, which only states that the information has to be available for the relevant authorities, the organizations that are under the obligation to notify, and persons or organisations who have a legitimate interest. The fact that the ultimate interest will only be indicated in bandwidths, and not in actual percentages, is in and of itself already a more extensive measure than prescribed by the Directive. Several reviews of the draft Implementation Act state that this leads to an invasion of privacy that is both disproportional and not properly or sufficiently substantiated in the clarification to the act.
- Reporting duty. Under the Implemention Act, Wwft-institutions are required to report to the Chamber of Commerce if and when they have reasonable doubt about the UBO-information of their client. An institution that fails to report to the Chamber of Commerce in such a situation, will commit an economic offense. As rightfully pointed out by several commentators, this ‘snitching’ does not only impact the relation of trust between an organization and its client, but also runs contrary to the duty of secrecy that -among others- notaries and attorneys are bound by. It is unclear how the Dutch legislator sees the balance between these two contrary obligations.
The Dutch government has taken advantage of the fact that several points pertaining to the exact implementation of the Directive, have been left to the Member States themselves. As such, the draft Implementation Act deviates from -among other- the French and German implementation acts. For example, the French and the German register will not be publicly accessible.
From draft to act
The question is whether these problems will be sufficiently addressed in the amended draft of the Implementation Act. In order to make the