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Summary

This report by the Law Library of Congress surveys the laws related to registration of beneficial owners and disclosure of information on corporate data in the European Union as a whole and in twenty-nine countries, representing all continents and major geographic regions of the world.  Foreign laws related to the registration of beneficial owners are compared and contrasted with the provisions of S. 1454, a bill presently under consideration in the United States Senate.

The individual country entries identify institutions authorized to collect information on beneficial owners, procedures for submitting and updating this information, existing exemptions from disclosure, and requirements for the government to verify the information provided.  They also indicate who has access to the corporate data provided to the authorities and how companies can be held liable for nondisclosure, for providing false information, or otherwise violating relevant legal requirements.  All individual country entries include a definition of “beneficial owner” or comparable terms as provided by national legislation.

The idea of ensuring greater transparency over beneficial ownership is relatively new.  In accordance with the beneficial ownership policy adopted by the G-20 summit in Brisbane, Australia in 2014, the Financial Action Taskforce (FATF), and the European 4th Anti-Money Laundering Directive, most of the countries in the survey have recently amended their legislation (e.g., Argentina, Brazil, Costa Rica, France, Germany, Italy, Jamaica, Jordan, Pakistan, Singapore, South Africa, Sweden, United Kingdom) or are currently working on amending their laws (Afghanistan, India, Netherlands).

It appears that of the G-7 countries, Canada and Japan are the only two jurisdictions that did not change their national laws even though both countries did commit to meeting FATF requirements.  In its 2014 G-20 Anti-Corruption Working Group Accountability Report Questionnaire, Canada reported that it does not “require that the beneficial ownership and company formation of all legal persons organized for profit be reported,” and no legislative amendment to address the issue has been introduced.  Japan also does not have a law that requires companies to disclose their beneficial ownership; however, a new rule that provides for disclosure of major shareholders was adopted in 2016.

Countries whose laws address beneficial ownership regulate this issue through company laws, company registration rules, regulations implementing EU directives, or anti-money laundering legislation.  They require that a company report information on beneficial owners to the registering authorities, which are usually state or local authorities.  In some unitary states, this function is performed by a designated national institution.  Information on corporate registration and beneficial owners is collected by business registrars (Afghanistan, Argentina, India, Sweden, United Kingdom), national tax authorities (Brazil), securities regulators (Australia, Pakistan), a securities exchange (South Africa), central banks (Armenia, Costa Rica), or local courts (France), or with regard to the EU, by a designated central registry in each Member State.

One major difference among the countries surveyed was in the definition of “beneficial owner.”  The definition accepted by the EU and its Member States is based on FATF Guidance, which defines a beneficial owner as a “natural person who ultimately owns or controls the customer and/or the natural person on whose behalf a transaction or activity is being conducted.”  Other countries add to the definition individuals with a “relevant interest” (Australia) or a “person with significant control” (United Kingdom).  These are individuals holding securities with the power to control the corporation and its transactions.  In some cases, these individuals are defined based on specific percentages of shares they own (the lower threshold is usually between 20% and 30%).  Japanese reporting requirements apply to all major shareholders.  While previously enacted legislation often does not address the issue of bearer shareholders or nominees, and treats beneficial owners as regular shareholders, newly proposed laws distinguish between a beneficial interest in a share and significant beneficial ownership (India), and contain a broad definition of “controlling beneficiary,” meaning an “individual or group of individuals who ultimately benefits from a good or service, or exercise(s) control over a company through ownership of securities, a pertinent contract or any other act, which allow them to impose, directly or indirectly, decisions on the shareholders or partners” (Mexico).  The study shows that even when the laws of a country do not contain transparency or beneficial ownership provisions, some countries may introduce special rules intended to prevent the use of corporate entities for unlawful purposes.  To remedy this situation in Lebanon, the Governor of the Lebanese Central Bank prohibited dealings with corporate entities whose stocks and shares are totally or partially issued in bearer form.

Certain reporting requirements are provided for transactions involving “beneficiaries” in specific economic sectors (e.g., financial institutions (Israel, Pakistan), dealers in precious stones (Israel)), or for activities conducted by representatives of self-regulated professions (Israel).  Exemptions from reporting requirements can be granted for individuals who own less than a particular percentage of company’s shares (Israel, Spain) and specific groups of individuals or companies working in select business sectors.  The research indicated less strict beneficial owner identification rules for the travel industry and manual currency exchange activities in Portugal, and for public corporations in Sweden.

Access to the corporate data reported in registration documents is determined differently in each country.  Some jurisdictions have created or are working on establishing open access to public registers of beneficial ownership (Afghanistan, Argentina, Australia, France, Israel, Jamaica, Netherlands, United Kingdom), although some may require the payment of fees (Australia, Jamaica, Netherlands).  The EU Member States and Japan provide access to government institutions, obliged entities, and all who may have “legitimate interests” without defining the parameters of these interests.  Others limit access to law enforcers (Singapore), monitoring government authorities (Armenia, Brazil, Costa Rica, Mexico), or members of the company (India).

It is broadly expected that companies will provide correct information to the authorities.  While most of the laws surveyed contain general provisions stating that information on beneficial owners must be updated within a specific period after the legal requirement has been introduced (Sweden) and then regularly thereafter (Brazil, Costa Rica, Germany, France), or within a reasonable amount of time (Portugal, Sweden), or when a situation changes (Japan), other countries establish strict chronological limits for reporting, ranging from two days (Singapore) to five years (Italy).  Mexican law provides for monthly updates to be submitted by companies if they work in areas designated as vulnerable to money laundering.  As a rule, governments do not verify information provided by companies and no data verification mechanisms are foreseen by national legislation.  Verification requirements were only found in the laws of Argentina, France, Mexico, Namibia, South Africa, and Spain.

In the case of a failure to disclose beneficial owners, a court or the registering authority may issue an order to comply (Australia, France) and impose a fine.  This may be a daily fine until the obligation to disclose is met (France, India) or a specific amount (Costa Rica, Japan, Spain, United Kingdom).  In some cases, penalties can be in the form of de-registration (Namibia) or imprisonment (Pakistan, Portugal).  Some countries (Armenia, Jordan) do not foresee any criminal or civil sanctions for failing to file accurate and timely information in the beneficial ownership registers.  Their laws state that failing to provide correct information is punishable, but no penalties have been defined so far.

In general, the survey finds that most of the countries that have beneficial ownership registration laws in place view public beneficial ownership registration as an anti-money laundering tool that works in alignment with other legal mechanisms, such as access to company information, risk assessment, government monitoring, and law enforcement.

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Last Updated: 10/04/2017