Register of ultimate beneficial owners
Cyprus has implemented the 5th Anti-Money Laundering EU Directive through enactment of the Prevention and Suppression of Money Laundering Activities Laws of 2007-2021 on 23 February 2021. Hence imposing an obligation on all legal entities to submit details of ultimate beneficial owners to its local public authority, Cyprus Companies Register, from March 2021. From 12th March 2021 every newly registered company should file details of its ubo within 30 days from incorporation through the interim electronic system solution. Non-compliance will result in criminal offence and fine for the company and its officers.
In March 2023 FATF published a guidance on beneficial ownership of legal persons fortifying its Recommendation 24 to help member states eliminate existence of shell companies through operation of register of real beneficial owners of businesses. Due to the fact that details on beneficial ownership of legal entities can be disguised with creation of complex ownership structures involving many layers of shares registered in the name of other legal persons, bearer shares, trusts, nominee shareholders with hidden identity of a real owner, or where nominee shareholders can be associates and family members “replacing” real beneficial owners.
Such standards will prevent the misuse of corporate vehicles for money laundering or terrorist financing whereby criminals, sanctioned individuals, tax evaders, etc will not be able to hide their funds from illicit activities.
Beneficial owner refers to the natural person(s) who ultimately owns or controls a legal entity and/or the natural person on whose behalf a transaction is being conducted. It also includes those natural persons who exercise ultimate effective control over a legal person. A person should control at least 25% + 1 share of the entity to be considered as ultimate beneficial owner (ubo). Details of the ubo should be electronically submitted to the Registrar. In case beneficial owners hold less shares than 25%+1, the details of a person having senior management and controlling position in the company should be submitted.
Initially anyone could had obtained extract from the UBO Register by filing an application to the Registrar for a nominal fee of 3,5 euro. However, later due to GDPR issues this right was abolished and now only competent authorities and obliged entities can request such information from the Registrar. Competent authorities include financial intelligence units, MOKAS, police, tax and customs departments. Request of every obliged entity will be examined by the Department and will be approved or rejected accordingly. Relevant documentation supporting request should be attached (court order, etc).
As per the Cyprus law, legal entity and each of its officers shall be liable to a fine of €200 and a further fine of € 100 for each day of continuation of the violation with a maximum total fine of € 20,000 unless officers can prove that exercised due diligence and took steps in order to submit details of the ubo to the Registrar. Also, company officers can be subject to criminal liability or prosecution.
Please make sure your companies submit details of the UBOs to the Cyprus Companies Registrar in order to avoid fines and criminal liability. Also remember that in case of changes in the ownership structure of a legal entity the latter is obliged to submit updated information to the Registrar within 14 days.
All entities whose strike off or liquidation has been enacted after 12 March 2021 should also complete the details of their UBOs.
Banks has also started implementation of this requirement and updated their internal policies accordingly. Corporate clients can expect to start receiving requests from their banks to provide confirmation of the ubo details filed with the Registrar.
Lastly, please also consider that generally banks impose obligation on their clients to report any changes in the corporate structure within 30 days in order to avoid difficulties with account operation and delays with transactions. So, if you did changes to corporate structure you should notify your banker asap and file an update to the Register of the UBOs in the Registrar.