Changes to directory of beneficial owners of legal persons
by Philip Raich
The (first) law on a directory of beneficial owners of legal entities came into force in Liechtenstein on 1 August 2019. Due to changes at European law (5th Money Laundering Directive, Directive EU / 2018/843), the government is obliged to amend the quite new Act on the Registry of Beneficial Owners (Gesetz über das Verzeichnis der wirtschaftlichen Eigentümer inländischer Rechtsträger – VwEG). In summary, the new act expands the obligations regarding the content and disclosure of the directory of beneficial owners and includes provisions regarding data and privacy protection of beneficial owners.
REASONS FOR THE NEW ACT
Liechtenstein has consistently implemented international and European legal standards for fighting against money laundering and terrorist financing. Compliance with international regulations ensure that Liechtenstein has access to international financial markets. The provisions of the 5th Money Laundering Directive will be implemented in an amendment to the VwEG and in other laws, in particular in the Due Diligence Act (Sorgfaltspflichtgesetz – SPG). The new act is currently in the Liechtenstein parliament (Landtag Liechtenstein) and shall enter probably enter into force simultaneously with the resolution of the EEA Joint Committee regarding the transposition of the Directive EU / 2018/843.
MAIN FOCUS OF THE NEW ACT
1. Examination of the directory when opening a business relationship
The new provisions extend the obligations of financial services providers to clarify discrepancies of own data of natural persons as well legal persons with the data entered in the Directory of beneficial owners. The bank and other financial service providers shall report such discrepancies.
In practice, founders, settlors and trust beneficiaries are always classified as beneficial owners, regardless of whether they exercise control over the legal entity after formation or incorporation. After entry into force, the applicants shall under certain conditions register the data of the beneficial owners of foreign trusts in the directory.
The access to the data in the directory of beneficial owners is newly regulated in accordance with 5th Money Laundering Directive. The circle of authorized persons will be expanded and the requirements for the disclosure of data will be adjusted.
With regard to the disclosure of data from the directory of beneficial owners, different rules apply for (a) disclosure to domestic authorities via local access, (b) disclosure of data to foreign authorities via administrative assistance, (c) disclosure to banks and financial institutions, (d) disclosure to other Liechtenstein compliance obligors (Sorgfaltspflichtige) and (e) disclosure to third parties.
Financial Intelligence Unit (FIU), Financial Market Authority (FMA), police, tax administration, general attorney and the court are entitled to inspect the directory without restriction in individual cases, as far it is necessary to fight against money laundering, preparation of money laundering and terrorist financing. On the basis of a request from a foreign authority by way of administrative assistance, a domestic authority shall decide upon discretion on the admissibility of disclosure to the foreign authority, inspect the list of beneficial owners and sends requested data to the foreign authority.
In contrast, third parties shall still proof a legitimate interest. However, it can be proven by statement that a trusteeship or similar legal agreement entered in the directory holds a controlling interest in a company or legal person from a third country. Third parties can request disclosure of the data in the directory with regard to non-stand-alone legal entities in case of a legitimate interest for disclosure. In the case of stand-alone legal entities, third parties can also request disclosure without showing a legitimate interest. In these cases, however, the requesting party shall provide evidence that the disclosure from the directory serves to combat money laundering, preparation of money laundering and terrorist financing.
FMA is entitled to review the material correctness of the data in the directory regarding legal entities during the general due diligence controls (Sorgfaltspflichtkontrollen). In addition, the Office of Justice is entitled to carry out checks itself or by independent third parties in case of suspected violation of law.
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If you are the beneficial owner of a Liechtenstein foundation or another legal entity or if you intend to establish a legal entity in Liechtenstein, we would be pleased to assist you. Should you have any further questions on this or other topics, we are pleased to talk to you and assist you in person.