Luxembourg Introduces Draft Legislation To Create Beneficial Ownership Registers

Luxembourg's government has published draft legislation to incorporate into national law the requirements under articles 30 and 31 of the European Union's Directive 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, better known as the 4th Anti-Money Laundering Directive.

Placed before the Chamber of Deputies on December 6, 2017, draft law no. 7217 would establish a central register of beneficial owners of Luxembourg legal entities such as companies and partnerships under the authority of the minister of justice, while draft law no. 7216 would create a similar register of beneficial owners of fiduciary contracts, that is express trusts, under the authority of the Administration de l'Enregistrement et des Domaines, Luxembourg's indirect tax authority.

Fourth money-laundering directive

The requirement for each member state to establish beneficial ownership registers is the main new feature of the fourth AML directive, one that has already been implemented by many EU countries. While the final form of the Luxembourg legislation is subject to the parliamentary process, it is unlikely to move far away from the EU text.

The definition of beneficial owners, initially as set out in the law of November 12, 2004 on money laundering and terrorist financing, has just been amended by the law of February 18, 2018 on professional duties and regulatory powers in relation to money laundering and the financing of terrorism, which incorporates into national law other provisions of the fourth AML directive governing information on the transfer of funds.

While the directive and the Luxembourg legislation are intended to create greater transparency regarding owners and beneficiaries of corporate and fiduciary structures, the government has chosen to incorporate safeguards against improper access to the registers and use of the data they contain.

Who is a beneficial owner?

The newly-enacted law designates the beneficial owner as any individual who ultimately possesses or controls the entity in question or for whom a transaction or activity is carried out. For companies and similar entities, this means that directly or indirectly, they possess or control a sufficient proportion of shares, voting rights or capital interest, including via bearer shares or other means, in an entity other than one listed on a regulated market and subject to EU or equivalent international requirements on transparency of ownership.

Direct ownership is measured by a shareholding exceeding 25% of the capital held by an individual, or indirect ownership by a shareholding exceeding 25% held by one or more companies controlled by the same individual(s). The law states that if this definition does not identify one or more beneficial owners, the designation applies to any individual acting as the principal executive of the entity.

In the case of fiduciary...