Prevention Of Money Laundering And Terrorist Financing: Identity Of Beneficial Owners

New guidance has been issued outlining the practical measures which should be taken by professionals to identify beneficial ownership and fulfil anti-money laundering and combating terrorism financing (AML/CFT) obligations.

On 20 December 2019, the Commission de Surveillance du Secteur Financier (CSSF) published Circular 19/732 (the Circular) to provide guidance to all professionals subject to AML/CFT obligations under the supervision of the CSSF. The Circular provides practical guidance on the legal requirements applicable to the identification of the ultimate beneficial owner(s) (UBO(s)) and includes illustrative examples. It outlines the reasonable measures that should be taken to verify the identity requirements and provides useful indicators to help detect potential concealment of beneficial ownership information.

A publicly available central register of beneficial owners (Registre des bénéficiaires effectifs) (the RBE) in Luxembourg was established in law on 13 January 2019 and came into force in March last year. A deadline for registration with the RBE first set at 31 August 2019 was subsequently postponed to 30 November 2019 by an administrative decision of the Luxembourg Business Registers.*

Key points of the Circular

Where the professional's customer is a natural person, such customer will in principle be the UBO, unless the customer is acting on behalf of (or fronting for) another person. In such cases, appropriate measures should be taken by the professional to determine if that person is the UBO.

Where the customer is a legal person or a legal arrangement, on the basis of article 1(7) of the law of 12 November 2004 on the fight against money laundering and terrorist financing, as amended (the AML Law), the Circular lays out a threefold cascade procedure to determine ultimate beneficial ownership as follows:

i. identify the natural person(s) who directly or indirectly holds or controls a sufficient percentage, namely more than 25% 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; and

iii. after having exhausted all possible means and provided that there are no grounds for suspicion, where no person under 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...