UBO filing requirements for Irish Regulated Funds imposedThursday, 02 July 2020
Ireland made its first rules concerning the keeping of registers of beneficial ownership in accordance with Directive (EU) 2015/849 (“AMLD4”) in 2016 in the form of the European Communities (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2016. These were replaced by the European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2019 (the “2019 Corporate Regulations"), and supplemented by the European Union (Anti-Money Laundering: Beneficial Ownership Of Trusts) Regulations 2019 (the "2019 Trust Regulations”), as the State sought to impose obligations on corporate vehicles, trusts, and other classes of entity, as required AMLD4 by and, latterly, Directive (EU) 2018/843 (“AMLD5”).
Although these regulations had attempted, to deal with some of the issues which arise when seeking to apply relevant standards to investment funds (see the 2019 Trust Regulations and their reference to "collective investment scheme trustee"), a number of open questions remained after their being made, including whether or not non-corporate schemes could apply the same standards as corporates, who may be classed as a beneficial owner, who was responsible for maintaining scheme registers and making filings, who would hold the central register, etc.
The Minister for Finance, by making the European Union (Modifications of Statutory Instrument No. 110 of 2019) (Registration of Beneficial Ownership of Certain Financial Vehicles) Regulations 2020 (the “2020 Regulations”) has answered many of those questions, whilst seeking to ensure that the requirements are proportionate, fit for purpose, and of sufficient standard so as to see Ireland adhere with EU law. In the following sections we give an overview of the 2020 Regulations and what they mandate, as well as providing some commentary on their impact and what interested parties might expect in terms of further development.
The 2020 Regulations, for the most part, and somewhat unusually, seek to modify the 2019 Corporate Regulations, but only insofar as the 2019 Corporate Regulations apply to certain financial institutions, including Irish Collective Asset-Management Vehicles (each an "ICAV") and Unit Trusts.
In terms of their effect, the principal changes brought into effect by the 2020 Regulations can be summarised as follows:
- Those holding beneficial ownership registers for Unit Trusts are to be subject to a "greater than 25 percent ownership" or control standard in terms of assessing whether or not one or more beneficial owners exist in the context of the scheme, similar to that in place for corporate entities subject to the 2019 Corporate Regulations;
- Management Companies are allocated the obligation, in first instance, of ensuring a Unit Trust's adherence with its obligations with respect to beneficial ownership;
- The “senior managing official” framework which exists for corporate entities subject to the 2019 Corporate Regulations in default of an identifiable beneficial owner does not apply to Unit Trusts, and their Management Companies are expressly not to be subject to such an analysis, in the context of the trust, however, Trustees are stated as being amongst the classes of entity to be listed as beneficial owners (without provision being made as to whether or not the Trustee must be a natural person);
- A Central Register of Beneficial Ownership of Irish Collective Asset-management Vehicles, Credit Unions and Unit Trusts (the “New Register”) is to be established, separate from the Central Register of Beneficial Ownership of Companies and Industrial and Provident Societies which alreadt exists;
- The Minister for Finance is empowered to appoint a Registrar who shall maintain the New Register and discharge associated functions. Whilst no person or entity is so appointed by the regulations, provisions is provided for how expenses associated with that role may be defrayed by the Central Bank of Ireland where it discharges the function, including by levying fees on regulated entities. A number of ancillary provisions are provided with respect to the Central Bank's acting as Registrar of the New Register;
- Entities subject to the 2020 Regulations, including ICAVs and Unit Trusts will have six months from the commencement of said regulations to file reports due to the Registrar of the New Register. Where authorised after the commencement of the 2020 Regulations, an entity in scope will have six months to provide its first report; and
- The 2020 Regulations are classed as a “Designated Statutory Instrument”, which means their breach by a regulated financial services provider may be penalised by the Central Bank of Ireland using its Administrative Sanctions Procedure.
Other provisions of the 2020 Regulations make consequential or unrelated amendments to the 2019 Corporate Regulations.
The making of the 2020 Regulations is to be welcomed and represents a progressive and sympathetic implementation of relevant EU rules in Ireland – taking into account the particularities of the investment funds sector and the need to ensure that the sector is subject to stringent, effective, and operable rules. To that end, Government's willingness to, seemingly, take into account transposition in other EU member states, and put in place a tailored regime, demonstrates commitment to the sector.
That being the case, a number of open questions, or issues which were addressed in industry guidance only up to this point, have not been dealt with, including the status of intermediaries, timelines for amendments to registers, access arrangements, etc. Further, much in terms of the success or failure of the regime created by the 2020 Regulations will depend on operational arrangements put in place by the Registrar of the New Register, when appointed. Whilst the 2020 Regulations suggest this will be the Central Bank, no order has yet been made in that regard. Interestingly, the 2019 Trust Regulations have not been amended by the 2020 Regulations, even insofar as the former relate to Unit Trusts. Revised regulations dealing with trusts other than Unit Trusts are expected in the near term and their potential impact on the financial sector and more broadly will be eagerly assessed across a wide range of sectors and interest groups.