On Friday 15 May 2020 the public consultation by the Dutch Ministries of Finance and Justice and Safety closed for the legislative proposal for the Implementation Act for the Registration of Ultimate Beneficial Owners (“UBO”) of Trusts and Similar Legal Structures.
The legislative proposal is a consequence of the obligation of the Netherlands to implement the fourth EU anti-money laundering directive, as amended by the fifth EU anti-money laundering directive. This EU directive requires the EU member states to provide for a UBO register for trusts and this UBO register for trusts, amongst others, has to include each beneficiary of the trust and, amongst others, the name, birthdate, birthplace, address, fiscal number and type and size of the beneficial interest of the beneficiary. The threshold of a shareholding of 25% plus one share or an ownership interest of more than 25%, as it applies to UBO’s of companies and other legal entities, does not apply to the beneficiaries of a trust.
Only the name, birth month, birth year, domicile, nationality and type and size of the beneficial interest are accessible by the public through the internet. The other information is only accessible by the Financial Intelligence Unit and certain public authorities. In two situations it is possible to shield this information (except for the type and size of the beneficial interest) at request of the beneficiary from the public. The first situation is that the beneficiary is subject to a disproportionate risk of fraud, kidnap, blackmail, harassment, violence or intimidation through the publication of this information in the register. In order to be able to use this exception it is required that the beneficiary is under police protection. The second situation is that the beneficiary is a minor or lacks capacity for another reason.
In the fifth EU anti-money laundering directive, the European Commission called for the EU member states to notify it of any legal structures that are similar to the trust. These would then have to be included in the UBO register for trusts on a similar basis. The Netherlands has consequently notified the European Commission that it regards the “Fund” as a similar legal structure as the trust. Subsequently the Dutch legislator has made it clear that the open and closed fund for joint account (“FGR”) are considered to constitute such a “Fund”. This has the unfortunate consequence that each beneficiary of an FGR has to be included in the UBO register for trusts with the information set out above. Especially in an open FGR the beneficiaries can change on a daily basis and there are beneficiaries with very small beneficial interests with a corresponding small risk of money laundering or financing of terrorism.
Our expectation is that the obligation to provide this information about each beneficiary of the FGR will lead to an unmanageable stream of information between the manager of the FGR and the manager of the UBO register. In addition, we think that an FGR in its usual form is not a similar legal structure as a trust. You can read more about this in the attached response to the legislative proposal which we submitted on Thursday 14 May 2020 to the legislator.
If you have any questions about this subject, please approach your usual contact at Van Campen Liem or, alternatively, please contact Diederik Palstra, 020-7601613, Diederik.Palstra@vancampenliem.com.