In relation to IV. AML Directive, amendment to Act No. 253/2008 Coll., on certain measures against money laundering and terrorist financing (hereinafter referred to as “AML Act”) was adopted on 19 October 2016. This article summarizes the most significant changes adopted by the amendment to AML Act affecting Czech legal entities.
Definition of Beneficial Owner
In compliance with IV. AML Directive, AML Act sets out, as of 1 January 2017, a general definition of a beneficial owner as “natural person who is effectively or legally able to exercise, directly or indirectly, decisive power over the legal entity, trust fund or other legal arrangement without legal personality.” This general definition is further specified by refutable legal presumption that, subject to conditions set out by the general definition, a beneficial owner of a corporation is a natural person who:
- by himself/herself or together with other persons acting in mutual compliance possess more than 25 % of voting rights or hold more than 25 % share on the registered capital,
- by himself/herself or together with other persons acting in mutual compliance control the person/entity ad (a) above,
- is designated as recipient of at least 25 % of the corporation’s profit, or
- is a member of statutory body, representative of a legal entity which is a member of statutory body or a person whose status is similar to the status of a member of statutory body, should there is no beneficial owner or the beneficial owner cannot be determined pursuant to letters (a) to (c) above.
The AML Act provides also similar refutable legal presumption in respect to beneficial ownership of other legal entities (associations, Public Service Company, etc.), trust funds or other legal arrangement without legal personality.
Obligation to Maintain Records on Beneficial Ownership
As of 1 January 2017, all legal entities are obliged to maintain and keep updated records to ascertain and verify identity of their beneficial owners, including records of circumstances which establish the status of a beneficial owner or other reason why such person is considered to be the beneficial owner. Such records shall be maintained throughout the whole period of such person being the beneficial owner and then at least 10 years after the end of such relationship.
Register of Beneficial Ownership Information
The amendment to AML Act significantly changes Act No. 304/2013 Coll., on public registers of legal entities and natural persons by establishing, effectively as of 1 January 2018, a new public register concerning beneficial ownership data of legal entities registered in Czech public registers, including the Commercial Register (hereinafter referred to as the “Register of Beneficial Owners”).
The following data about beneficial owner(s) shall be registered in the Register of Beneficial Owners:
- name and habitual residency address and permanent residency address, should it differ from the habitual residency address;
- date of birth and Personal Identification Number, if applicable;
- citizenship; and
- data on:
- share on voting rights, should the status of the beneficial owner be based on direct participation on the legal entity;
- share the corporation’s profit, should the status of the beneficial owner be based on the fact that he/she is designated as the recipient of corporation’s profit; or
- other circumstance, should the status of the beneficial owner be based on such other circumstance.
Publicity of the Register of Beneficial Owners
The Register of Beneficial Owners is being established as non-public register maintained by the Registry Court.
The data from the Register of Beneficial Owners will not be publicly available. Full excerpt of the data from the Register of Beneficial Owners will be possible to provide to the registered entity. Partial excerpt to the limited extent of data, will be possible to provide to a person/entity who/which proves interest in relation with prevention of specific crimes related to money laundering and terrorism.
Further, remote access to the Register of Beneficial Owners will be also enabled to specified entities (e.g. obliged person as defined in AML Act, Financial Analytical Authority, courts, criminal law enforcement authorities, financial or customs authorities, Czech National Bank etc.). Please note that such access will be possible to enable only provided that the identity of the accessing individual will be detectable.
Although the wording of the amendment to AML Act is not clear as to the deadline for legal entities to notify the data to the Register of Beneficial Owners, the most common interpretation presumes that existing legal entities registered in the Commercial Register will be obliged to notify the data to the Register of Beneficial Owners until 1 January 2019. In case of change, the registered entity is obliged to file application to register such change without undue delay.
As of 1 January 2018, the contracting authority itself is obliged to acquire the data on beneficial owner of the selected contractor, provided that the selected contractor is a legal entity, from the Register of Beneficial Owners and to specify such data in the public procurement documentation. Only if the data cannot be acquired from the Register of Beneficial Owners, the contracting authority will be authorized to require from the selected contractor to submit identification data on all beneficial owners of the selected contractor and documents evidencing status of such persons as beneficial owner of the selected contractor.