Luxembourg Update: CSSF Provides Clarification On UBO Identification And Verification

On 20 December 2019, Luxembourg's financial regulator, the Commission de Surveillance du Secteur Financier (the "CSSF"), published CSSF circular 19 / 7321 (the "Circular") regarding clarifications on the identification and verification of the identity of ultimate beneficial owners ("UBO"). The Circular aims to provide guidance to all professionals subject to the AML / CFT supervision of the CSSF (the "Professionals") on the practical implementation of UBO identification requirements and verification measures.

Specifically, the Circular addresses: (i) the UBO identification requirements for customers of Professionals that are natural persons, legal persons or legal arrangements, (ii) the measures to be taken to verify the relevant UBO's identity and (iii) certain indicators that may help detect potential concealment of beneficial ownership information. A number of Financial Action Task Force ("FATF") reports and guidance documents are also incorporated into the Circular.

Identification

Considerable detail and numerous examples are set out in the Circular in respect of establishing and identifying the UBO of a legal person. The CSSF confirms that Professionals must follow the threefold procedure provided for in the law of 12 November 2004 on the fight against money laundering and terrorist financing when determining the UBO. This threefold procedure requires Professionals to:

(a) Identify the natural person(s) who directly or indirectly holds or controls a sufficient percentage, namely 25% plus one, of the shares, voting rights or ownership interest in an entity;

(b) Identify any person who controls the legal entity via other means2; and

(c) After having exhausted all possible means and provided that there are no grounds for suspicion, where no person under 1) or 2) 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 (dirigeant principal).

The CSSF provides welcome clarification on this threefold procedure in the Circular noting that the first and second steps are not alternative options. Each of these steps should be fully considered before progressing to the final step. This final step, i.e. identifying the senior managing official as the UBO, should only be used as a last resort and constitutes an express fallback option.

In circumstances where other types of entities participate in the ownership structure...