CSSF Circular 19/732: Clarifications on the identification of the Ultimate Beneficial Owner(s) has been saved
CSSF Circular 19/732: Clarifications on the identification of the Ultimate Beneficial Owner(s)
6 January 2020
Regulatory News Alert
Context and objectives
On 20 December 2019, Commission de Surveillance du Secteur Financier (CSSF) published Circular CSSF 19/732 relating to clarifications on the identification and verification of the identity of ultimate beneficial owner(s) (UBOs). The Circular aims to provide guidance to all professionals subject to the AML/CFT supervision of the CSSF on the practical implementation of the identification requirements of UBOs, as well as on the reasonable measures that should be taken to verify the identity requirements.
The Circular outlines the ultimate beneficial owner identification requirements for customers that are either natural persons, legal persons, or legal arrangements, and describes the related verification measures. The Circular also contains indicators helping to detect potential concealment of beneficial owner information.
In accordance with the Circular, UBO identification should go beyond the mere collection of a name, document, or check in a registry. The examples provided in the Circular are meant to assist professionals in meeting their obligations but are not intended to be exhaustive examples.
The Circular develops a threefold approach to identify the UBO:
I. Identify the natural person(s) who directly or indirectly holds or controls a sufficient percentage, namely 25 percent plus one, of the shares, voting rights, or ownership in an entity
II. Where no natural person can be identified under any of the scenarios under (i), identify any person who controls the legal entity via other means
III. After having exhausted all possible means, where no person under point i) and ii) is identified, or if there is any doubt that the person(s) identified is/are the beneficial owner(s), identify any person who holds the position of senior managing official (SMO).
It is important to highlight that measures (i) and (ii) are not alternative options, but cascading measures. Assessments under (i) and (ii) have thus each to be fully completed and formalised before resorting to measure (iii) which constitutes an express fallback option only applicable when all possible measures to identify the UBO under (i) and (ii) have been exhausted and come to no result.
The Circular provides that if no UBO is identified, the business relationship cannot be established. In case of an existing business relationship, the transaction(s) should not be carried out or the business relationship should be terminated. Furthermore, in such cases, consideration should be given to file a report of ML/FT suspicions.
The Circular also considers the specific situation of companies whose shares are admitted to trading on regulated market. In this case, in principle, there is no need to identify the UBO of a customer whose shares are admitted to trading on a regulated market in one or more EU Member States or in a third country market that is subject to equivalent disclosure/transparency obligations.
However, in accordance with the Transparency Directive, such disclosure requirements are prescribed only for shares which are traded on regulated market. Therefore, issuers of securities other than shares (such as debt instruments), and issuers whose shares (or depositary receipts presenting shares) are admitted to trading on a market other than a regulated market, are not subject to the necessary transparency obligations and do not qualify for the exemption. Consequently, in the latter cases, UBO(s) should be identified and verified.
Finally, the Circular provides useful indicators to help detect potential concealment of beneficial ownership information.
How can Deloitte help?
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Key Deloitte AML services are:
- AML/KYC remediation plan
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- Qualification and set up of Responsable du respect des obligations and Responsable du contrôle du respect des obligations (as required by the Law of 12 November 2004).
With our Regulatory Watch Kaleidoscope service, Deloitte can also help you stay ahead of the regulatory curve to better manage and plan upcoming regulations.
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