(Non)publicity of data recorded in the register of the beneficial owners
We have already informed you previously on our website about the register of the beneficial owners which was established due to implementation of the so called IVth AML Directive (for more click here and here). The objective of this article is to describe, how the data recorded in the register of the beneficial owners are accessible to third parties and to inform about the upcoming changes in this area arising from the adoption of Directive (EU) 2018/843 of the European Parliament and of the Council of May 30, 2018, amending the AML Directive (also known as the Vth AML Directive).
Regulation under the Act on Public Registers
Nowadays, the register of the beneficial owners is maintained as non-public. The full excerpt of the recorded data could be provided to the registered person/entity and to the public authorities specifically listed in the Act on Public Registers, which have a remote access to the register.
Under Section 118g para. 2 of the Act on Public Registers, as applicable now, a partial excerpt shall be provided to those who prove there is an interest towards prevention of the crimes listed therein linked to legitimisation of proceeds of crime.[1] According to the explanatory memorandum to the act and the respective provision, “the interest” or under the Directive “the legitimate interest” should be understood as the public interest, i.e. interest publicly important and beneficial.[2] The explanatory memorandum mentions, that according to the IVth AML Directive anyone could prove such interest, in each case on the basis of the particular aspects of the given situation, i.e. if there is a reasonable suspicion of criminal activity.[3]
Individuals/legal entities are allowed to access data in the register only if they successfully prove their interest in preventing individual crimes. This is about to change due to the adoption of the Vth AML Directive.
The Vth AML Directive
The declared objective of the AML regulation is mainly the effort to set a more effective fight against financing of terrorism, corruption and money laundering. In order to achieve that, the Vth AML Directive brings a radical change – the data recorded in the register shall be available to anyone from the broad public. Anyone shall be entitled to access at least the following data: name, month and year of birth, country of residence, nationality and the information regarding the nature of the beneficial owner’s participation. It depends on the national legislation which other data will be also accessible to the public.
The Directive allows the member states to condition the access to the register by an on-line registration and by a payment of a fee. As well as before, the access could be denied in case of exceptional circumstances, however a detailed evaluation of the given situation and grounds for application of such exception shall be newly required.
Sanctions for breaching the obligation to register the beneficial owner
We consider important to mention also other demands arising from the new wording of the Directive. Article 30 expressly establishes an obligation of member states to implement effective, adequate and dissuasive measures or sanctions for breaching the obligation to obtain and hold information about the beneficial owner[4] as well as measures to secure that data recorded in the register are adequate, accurate and current, which shall help to monitor and repair any discrepancies in the register.[5]
Implementation of the Vth AML Directive
The specific measures fulfilling the abovementioned requirements of the Vth AML Directive have yet to be created, however considering the current inclusion of the regulation to the Act on Public Registers, it is conceivable, among other options, that the dissuasive measures or sanctions adopted for the registry proceeding would be amended and applied also in the field of register of the beneficial owners. This may include, in particular, the sanction under Section 104 of the Act on Public Registers, which allows the registry court to impose a fine in the amount reaching up to CZK 100,000 on a company in case of failure to deliver the requested data and/or documents upon request of the court or sanction under Section 9 of the same act, under which the court may rule to dissolve such company with liquidation. Apart from that, it is possible that breach of such obligations will be qualified as an administrative offence or even as a crime.
An amendment to the Act on Public Registers in relation to the Vth AML Directive is in the legislative process now. However the proposed amendment deals only with the matter of publicity of the registered data, the extent of which is taken over from the Vth AML Directive.[6] According to the proposed amendment, the access shall be remotely available and shall not be under any fee. The required sanctions securing performance of the obligations under the Vth AML Directive and under the Act on the Public Registers are not addressed in this proposed amendment.
With regard to the fact that the transposition deadline is on January 1, 2020, we should expect some more legislation in this area within the next few months or years, about which we will keep you informed.
[1] These are specifically crimes of accessoryship, accessoryship by negligence, legitimisation of proceeds of crime, legitimisation of proceeds of crime by negligence and the crimes being the source thereof, and the crime of terrorist attack under Section 311 para. 2 letter c) of the Penal Code.
[2] The explanatory memorandum to Act no. 368/2016 Coll., which amends act no. 253/2008 Coll. on precautions against legalization of the incomes from criminal activity.
[3] The explanatory memorandum lists namely the contracting authorities of the public procurements and other entities who operate with public funds, contracting partners which during interaction with a legal entity find out about circumstances that could establish their obligation to notify the crime under Section 368 para. 1 of the Penal Code.
[4] Article 30 para 1 in the wording of the Vth AML Directive
[5] Article 30 para 4 in the wording of the Vth AML Directive