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Additional obligations for entities as the Finnish money laundering act imposes new obligation to identify ultimate beneficial owners (UBO)
A) Obligation to register UBOs
As of 1 July this year new businesses to be registered with the Finnish Trade Register must also register their UBOs with the Beneficial Owner Register (UBO register) maintained by the Finnish Patent and Registration Office. Existing entities must register their UBOs no later than 1 July 2020.
An UBO is a natural person who is the ultimate owner or has the power of control over a legal entity. The aim of the UBO register is to provide more transparency in relation to ownership structures and this way it serves as an additional tool in combatting money laundering and terrorist financing.
The registration obligation derives from the 4th Anti-Money Laundering Directive, which was implemented in Finland through amendments in the Finnish Money Laundering Act in July 2017. The fact that the UBO register was opened only in July this year makes Finland one of the last EU member states to set up the UBO register. Most of the EU-member states have set up their UBO registers already during 2017-2018.
• Who must register UBOs?
All legal entities except for listed companies, housing companies, mutual real estate companies, foundations, religious communities and associations must register their UBOs with the UBO register.
• Who is regarded an UBO?
An UBO is a natural person holding more than 25 per cent of an entity’s ownership or voting rights. If another legal person holds a share of 25 per cent or more in the entity, the natural person(s) who de facto has the right to make independent decisions in the holding entity must be identified. Also, when considering UBOs, not only ownership and voting rights shall be taken into consideration but also, for example, the rights conferred by a shareholders’ agreement, by-laws and other arrangements by which control de facto may be exercised.
Below an illustration on the identification of UBOs (voting rights correspond to number of shares/ownership):
UBOs of entity A Oy are:
o Person 2 (with an indirect ownership through B Oy)
o Person 4 (with an indirect total ownership of 30% through D Oy and E Oy)
UBOs of entity A Oy are not:
o Person 1 (because this person’s ownership does not exceed 25%)
o Person 3 (because this person does not own more than 25% of A Oy (but this person is, however, an UBO of entity C Oy with an ownership of 100% of C Oy)
• If there are no UBOs?
Entities have an obligation to actively try to identify their UBOs meaning, for example, that if an entity is aware of the existence of a shareholder agreement the entity should investigate how the agreement de facto impacts the use of control in the entity and whether any UBOs can be identified. An entity’s obligation to identify its UBOs is, however, always limited to information that is known to the entity. In connection with the registration the correctness of the information filed is not verified. It is the responsibility of the entity in question to make sure that the filed information is correct and up-dated when necessary.
If the UBO cannot be identified or if an entity does not have any UBOs, then the members of the board of directors, managing director, general partner or other persons in similar positions are regarded as UBOs. Even if an entity does not have or is not able to identify its UBOs it must communicate this to the UBO register.
• Is information in the UBO register public?
The information filed with the UBO register is not public, but a special request to receive information on an entity’s UBOs must be separately filed with the Trade Register (maintaining the UBO register). Even if the information filed with the UBO register is not public, information whether an entity has made a registration with the UBO register at all is public.
Only such parties that need information on UBO’s in order to be able to comply with their obligations under the Finnish Money Laundering Act are entitled to receive information from the UBO register (these are in practice such parties that have an obligation to identify their customer under the Finnish money laundering rules such as credit institutions, law firms and realtors to name a few).
Information filed with the UBO register includes the name, date of birth/personal identity number, citizenship, place of domicile and the nature of the ownership/control (equity, voting rights or other) of the UBO.
• Deadlines and liability for non-compliance
Since 1 July 2019 it has been mandatory for new entities to, in connection with their notification of incorporation, also register their UBOs. Existing entities (incorporated before 1 July 2019) must register their UBOs no later than 1 July 2020.
Failure to register UBOs in time or if registering false information may result in fines or, in aggravated cases, imprisonment for a maximum term of three years.
B) Entities obliged to keep an internal record of their UBOs as of 1 January 2019
The Finnish Money Laundering Act also requires entities, obliged to identify their UBOs, to maintain an internal record of their UBOs. In practice this means that an up-to-date record including the same information as that registered with the UBO register must be kept with the entity in question. The obligation to draw up the record and to see that it is up-to-date lies with the board of directors of the entity (or corresponding body if not a limited liability company). The purpose of the list is to support the entity in having up-to-date information and to follow up on its UBOs. The list is not public.
Please contact us if you wish to receive additional information on this topic.