Irish Companies Need to Take Heed of New EU Anti-Money Laundering Requirements

Last week came the introduction of a new law on corporate transparency that has important implications for companies based in Ireland.

Irish companies are now obliged to keep a record of the details of their actual beneficiaries. Previously, companies were not required to keep a record of their direct shareholders. In many cases, the records of existing shareholders indicate that the shares of an "A" company are held by a "B" company. The shares of company "B" can be held by a company "C" and so on.

By creating a complex corporate-owned network, people who own and control corporate entities can be difficult to identify. The new legislation will oblige Irish business managers to investigate and identify natural persons who own and control their businesses and who keep this information in a register.

The Regulation is a first step in Ireland's transposition of the Fourth European Anti-Money Laundering Directive, which aims to increase the transparency of business ownership in combating money laundering, terrorist financing and evasion fiscal.

Companies are required by regulations to take all reasonable steps to obtain and maintain accurate and up-to-date information about their beneficiaries.

As part of the transposition of the Directive into Irish law, a new central register of beneficial ownership will be established in Ireland. Information held by Irish companies will be stored and made available to regulatory authorities.

The government held a public consultation earlier this year on the extent to which an Irish central register of beneficial ownership should be open to the public.

The outcome of this consultation has not yet been published, but ultimately the problem may be compelled at EU level with an amendment to the EU Directive which should include the requirement that the records be inspected by the public. This has caused some controversy because of concerns about privacy and confidentiality.

A publicly accessible registry of trusts in France was declared unconstitutional in a recent decision by the French Constitutional Council, which held that the public nature of the register and the register itself were contrary to constitutional protections for the protection of private life. Similar difficulties of public records can be expected in other EU jurisdictions.

The directors of Irish companies will take the necessary steps to establish a beneficial ownership record and then complete it with the relevant information.

Administrators will then have to consider which processes to implement to ensure that information is kept up to date. Entities from specific industry sectors may find the requirements more of a challenge, such as corporate fund vehicles whose actual beneficiaries change frequently.

The full transposition of the Directive is planned for mid 2017. We will have to wait until the transposition bill sees how all the requirements related to the beneficiary property will be confused.