The Central Register of Beneficial Owners in the New Law on Counteracting Money Laundering and Terrorist Financing
Dear ladies and gentlemen,
We would like to draw your attention to a recent Act that will come into effect in September 2019.
The legal advisors of sdzlegal Schindhelm, in co-operation with getsix®, have prepared for you a summary with ‘Frequently Asked Questions’. We recommend that you familiarise yourself with the Act as soon as possible. We are ready to support and assist you with this, both in theory and in practice.
On 13th July 2018, the Act of 1st March 2018 on counteracting money laundering and terrorist financing (Journal of Laws of 2018, item 723, furthermore referred to as the “Act”), which replaced the existing Act on the subject in question. According to the grounds of the draft Act, its purpose is to increase the effectiveness of the anti-money laundering system and in this respect adapt Polish regulations to EU regulations, including in particular Directive 2015/849 of the European Parliament and Council of 20th May 2015 on the prevention of the use of the financial system for money laundering or terrorist financing (the so-called AML IV Directive).
Pursuant to the Act, a Central Register of Beneficial Owners is to be established on 13th September 2019. The creation of the register in question gives rise to new obligations for the vast majority of commercial law companies, which the companies will be obliged to fulfil by the statutory deadlines. Please find the most important information concerning the planned operation of the register, the scope of disclosed data and the obligations of commercial companies related to the establishment of the register below.
1. Beneficial Owner
It is crucial for the issue in question to properly define “beneficial owner”, as the definition has been extended under the new Act in relation to the previous one. Pursuant to Article 2(2)(1) of the Act, >a beneficial owner is as follows:
“natural person(s) having direct or indirect control over the client [natural or legal person or unincorporated entity] by virtue of their powers in law or in fact enabling them to exercise decisive influence over the acts or activities undertaken by the client, or the natural or legal person(s) on whose behalf a business relationship or an occasional transaction is entered into [hereinafter referred to as the “General Definition”], Beneficial Owners include also:
- in the case of a client who is a legal person other than a company, whose securities are admitted to trading on a regulated market subject to disclosure requirements under European Union law or the equivalent law of a third country:
- a natural person who is a shareholder of the client and who has the right to own more than 25% of the total number of shares of this legal person,
- a natural person holding more than 25% of the total number of votes in the body constituting the client, also as a pledgee or user, or on the basis of agreements with other persons entitled to vote,
- a natural person exercising control over a legal person or legal entities, which jointly have the right to own more than 25% of the total number of shares of the client, or jointly own more than 25% of the total number of votes in the client’s body, also as a pledgee or user, or under agreements with other persons entitled to vote,
- a natural person exercising control over the client by virtue of having the rights referred to in Article 3(1)(37) of the Accounting Act of 29th September 1994 (Journal of Laws of 2009, item 351) in relation to that legal person, or
- a natural person holding a senior management position where there is a proven lack of possibility to determine or doubt as to the identity of the natural persons referred to in the first, second, third and fourth indents and when there is no suspicion of money laundering or terrorist financing [hereinafter referred to as the “Catalogue”].
The statutory definition of a beneficial owner is broad, as the list pointed out in the Act is only a detail of this definition, but does not exhaust it. Therefore, it requires a given entity and its decision-making processes to be checked each time for the existence and possible identity of beneficial owners who have control over the decision-making process in establishing a business relationship or during the execution of an occasional transaction and may have a decisive influence on it, but are not included in the aforementioned Catalogue only in the General Definition.
2. Central Register of Beneficial Owners – information about the register
In order to increase the security of trading, facilitate the objective verification of the structures of legal entities and the processing of information on beneficial owners, the Act provides for the establishment of a Central Register of Beneficial Owners (hereinafter referred to as “CRBO” or “Register”). According to the transitional provisions of the Act, the CRBO is to be established on 13th October 2019.
The register shall be public and access to it shall be free of charge. The CRBO will be run by the Ministry of Finance in an ICT system. Pursuant to the Ordinance of the Minister of Finance of 16th May 2018 on applications for access to information on beneficial owners and on making such information available (Journal of Laws of 2018 item 965, hereinafter referred to as the “Ordinance”) The Register will be located on the website of the Ministry of Finance, through which applications for entry/updating of data in the Register can be submitted, the status of their processing by the competent authority can be verified and information on beneficial owners can be downloaded.
3. Obligations of companies related to the establishment of the Register
All commercial companies, except public joint-stock companies, i.e. (i) general partnerships, (ii) limited partnerships, (iii) limited joint-stock partnerships, (iv) limited liability companies, (v) joint-stock companies, except public companies, will be obliged to submit information on their beneficial owners to the Register and to update such information in case of change.
The information to be reported to the CRBO includes (i) the identification data of the company and (ii) the identification data of the beneficial owner and the member of the body or shareholder authorised to represent the company, provided that:
- the identification data of the company include the following: name (company), form of organisation, registered office, KRS number, NIP (tax identification number);
- the identification data of the beneficial owner and a member of the body or partner authorised to represent the company, are as follows: name and surname, citizenship, country of residence, PESEL number or date of birth – in the case of persons who do not have a PESEL number, information on the size and nature of the share or rights of the beneficial owner.
Applications to the Register will be made free of charge, submitted as an electronic document compliant with the model provided by the Ministry of Finance, bearing a qualified electronic signature or a signature confirmed by a trusted ePUAP profile. The application may be submitted by a person authorised to represent the company.
The application to the Register must include a declaration of the person making the application on the truthfulness of the information submitted, submitted under pain of criminal liability for making a false declaration.
The information covered by the application is to be entered into the Register immediately after its submission. The information collected in the Register is to be kept for the time necessary for the performance of tasks carried out to prevent money laundering or terrorist financing.
4. Deadlines for reporting and updating data to the CRBO
Before the effective date of regulations on the establishment of the CRBO, i.e. 13 October 2019, companies entered into the National Court Register will be obliged to make the first entry of information on beneficial owners to the Register within 6 months from the effective date of these regulations, i.e. until 13 April 2020.
However, in the case of companies registered on 13th October 2019 and after that date, they will be obliged to submit the information on beneficial owners to the Register within 7 days from the date of registration of the company in the National Court Register, with the reservation that Saturdays and public holidays are not included in the deadline.
Entities entered in the CRBO will also be required to update the data disclosed in the Register each time the data changes. In such a case, the period for updating shall be 7 days from the date of the change, with the reservation that Saturdays and public holidays are not included in the deadline for updating.
5. Penalty for failure to comply with the obligation to report to the CRBO
Pursuant to art. 153 of the Act, companies which have not fulfilled the obligation to submit the required information to the Register by the deadline specified in the Act are subject to a fine of up to PLN 1,000,000,000.
6. Current status of the procedure for the establishment of the Registry
The current official information states that the deadline of 13th September 2019 for the establishment of the register remains valid. On that day, the provisions of the Act on the establishment of the Register and the Executive Order to the Act, specifying the procedure for filing applications and providing access to information in the Register, will come into force.
The website where the Register will be located and where applications can be submitted has not yet been made available. There is also no information about its exact address – it follows from the Regulation that it is to be located on the website of the Ministry of Finance, however, no official information or announcements in this respect have been presented.
However, as practice in the other Member States has shown, the creation of the Registry itself does not necessarily mean that it has to be opened. In many countries, including e.g., Austria, France, Germany, Spain and Sweden the registers were not opened as of April 2019 despite having been created before that date1. Therefore, it is likely that even if the Polish Register is established by the deadline provided for in the Act, it may become operational at a later date. At the moment, however, there is no official information in this respect.
1Source: Summary of registers of beneficial owners in the EU 2019, Transparent Date, April 2019, www.medium.com
Below you will find answers to the most frequently asked questions.
1) Who is subject to the obligation to report beneficial owners to the Register?
The obligation to report beneficial owners to the Register under the Act applies to commercial law companies with the exception of partnership and public partnership, therefore it is an obligation of a general partnership, limited partnership, limited joint-stock partnership, limited liability company, limited liability company and joint-stock companies, the securities of which are not admitted to trading on a regulated market.
2) How to identify a beneficial owner?
Identification of the beneficial owner requires each time that a given entity is checked for the existence of persons having the rights referred to in the General Definition and that subsequent points in the Catalogue are checked. If (i) none of the shareholders holds more than 25% of the shares, (ii) none of the shareholders holds more than 25% of the total vote in the decision-making body of the entity (which each time requires a review for preferences, pledges, usufruct rights or appropriate shareholder agreements), (iii) no shareholder jointly owns more than 25% of the total number of the client’s shares, or jointly owns more than 25% of the total number of votes at the client’s decision-making body (including pledge, usufruct or agreement), (iv) no natural person is a parent entity under the Accounting Act, then (v) a senior manager is identified as the beneficial owner. Please note that the absence of any person listed under i-iv must be evidenced by means of, for example, information from the register in which the company is registered.
3) Can a legal entity be a beneficial owner?
No, the beneficial owner is always a natural person or natural persons, if there is more than one.
4) Who enters the beneficial owner to the Register?
Pursuant to the Act, the entry to the Central Register of Beneficial Owners is made by a person authorised to represent the company (i.e. a member of the management board or a proxy). The Act does not explicitly state that it is possible to file applications through a proxy who is a lawyer, and there are no detailed regulations specifying the mode and manner of filing applications to the Register at the moment, so it is now impossible to answer this question in an unambiguous manner. The application is submitted electronically by means of a signature confirmed by a “Trusted Profile” on ePUAP or a qualified electronic signature, so such a qualified signature from another EU country will be accepted when making the application.
5) Can the beneficial owner be a person not directly linked to the company?
Yes, there may be a situation where, as a result of contracts and agreements concluded, a person who is not directly related to the company has a decisive influence over it. An example of this may be a situation in which a shareholder of a company holding 30% of its shares concluded an agreement with a third party, in which they committed to undertake certain actions in relation to the third party as a shareholder of that company. As such, the person with whom the agreement was concluded would be the real beneficiary of the company.
We will be keeping track of the legislative work and keep you informed of any changes in this respect.
The information contained above is of a general nature and does not concern the situation of a specific company. Due to the speed of changes occurring in Polish legislation, we kindly ask you to determine, on the date of this information, whether it is still up to date.
Should you have any questions or concerns regarding the Register of Beneficial Owners, please do not hesitate to contact us!