Hundreds of thousands of organizations to notify ultimate beneficial owners
Registrations of companies’ and other organizations’ ultimate beneficial owners will begin in July. The EU-level aim is to get a tighter grip on the disturbances caused to the financial system due to for example terrorist financing.
Money laundering and terrorist financing constitute a considerable problem for the financial system. Naturally, many governments and policymakers have called for increased transparency in business.
The EU has contributed to these global efforts by requiring its member states to set up national registers that list the so-called ‘ultimate beneficial owners’ (UBOs) of legal entities. While the requirement seems to concern the member states of the EU, it in reality translates into obligations for legal entities to identify, record, and in most cases register their UBOs.
Registrations of UBOs will begin on 1 July 2019 in Finland. To ease your way into filing UBO notifications, we have gathered a quick recap below.
Who is required to register their UBOs?
The requirement varies on the type of entity:
Required to fileOnly required to file when UBO is not a partnerNot required to fileLimited liability company,
public limited companyGeneral partnershipListed companyCo-operativeLimited partnershipPrivate traderMutual insurance company,
public mutual insurance company Housing companySavings bank Mutual real estate limited companyCo-operative bank AssociationTenant-owners' society FoundationInsurance association Religious communityEuropean economic interest grouping Mortgage society European company (Societas Europaea)
To keep things simple for the purposes of this recap, we will be mainly referring to rules applying to companies.
Who is a UBO?
‘Ultimate beneficial owner‘ refers to a natural person who ultimately controls a company either directly or indirectly. In principle, a natural person has a direct ownership of a company once (s)he owns more than 25% of a legal person. An indirect ownership could be, for instance, exercised through another company. Additionally, an indirect ownership could be based on the articles of association or the shareholders’ agreement in the case they grant someone the power to appoint or dismiss the majority of the board members.
More specifically, a natural person is a UBO if (s)he:
1. directly or indirectly owns more than 25% of the shares or otherwise owns a corresponding share of the legal person;
2. directly or indirectly holds more than 25% of the voting rights and these voting rights are based on ownership, membership, articles of association, partnership agreement or corresponding rules; or
3. by other means ultimately controls the legal person.
In case it is not possible to identify UBOs by using the above parameters, the board of directors or accountable partners, the managing director, or other person in a similar position must be recorded as the UBO.
Who is responsible for keeping internal records?
Although the requirement to file UBO notifications does not apply to all entities, most legal entities are still required to maintain internal records of their UBOs. This obligation has been operational since 1 January 2019. Notably, listed companies are excluded from both having to keep internal UBO records and filing UBO notifications.
A member of the board or the entity’s accountable partner must ensure that a list of UBOs is maintained in a reliable manner.
What information must internal records contain and what information will be registered?
Internal records must contain each UBO’s
2. date of birth,
4. country of residence,
5. basis of control or ownership, and
6. scope of control or ownership.
The above information (plus municipality of residence and, if available, Finnish personal identity number) will be included in the official UBO register.
When and how to file a UBO notification?
Notifications may be filed from 1 July 2019 onwards via www.ytj.fi. The YTJ online service is currently only available in Finnish and Swedish, and using the service requires a Finnish personal identity number. Filing is free of charge, and companies may follow a specific authorization process to allow a representative to file the notification on the company’s behalf.
The deadline for filings is 1 July 2020 and after that whenever the filed details change. Please note that companies required to file a notification must do so even if they have no UBOs or are not aware of them.
Additionally, as of 1 July 2019 the start-up notification of a new company must include information on beneficial ownership.
What are the sanctions for failing to comply with UBO obligations?
In case registration obligations are neglected or if notified information is false, potential sanctions include a fine and even imprisonment for up to three years. These sanctions are based on the Finnish Business Information Act (244/2001) and the Finnish Criminal Code (39/1889).
What is the legal basis for UBO obligations?
The Finnish Act on Preventing Money Laundering and Terrorist Financing (444/2017) and the underlying 4th Anti-Money Laundering Directive (EU) 2015/849 require that legal entities identify their UBOs, file UBO details for registration, and keep those details up-to-date. Further provisions on registrations are provided in legislation concerning each type of legal entity.
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