Beneficial Owner Register - In a few days important changes will come into effect

Beneficial Owner Register -
In a few days important changes will come into effect

During the summer of 2019 the so-called EU-Financial Adjustment Act was adopted in Austria, introducing also certain important changes to the Austrian Beneficial Owners Register Act. The new rules aim to implement the 5^th Money Laundering Directive (Directive (EU) 2018/843). Most of the changes to the Beneficial Owners Register Act will become effective on 10 January 2020.

The Register will be opened to the public domain

As of 10 January 2020, the Register of Beneficial Owners will become accessible to the general public.

While this does not mean that everybody can simply browse the Register on the internet, any person may – without the need to demonstrate a reason or legitimate interest – inspect the Register by requesting a so called “public excerpt”. This public excerpt contains information on:

the legal entity’s name, address, register and register number, legal form and information regarding the period of time for which the legal entity has been in existence;
the direct or indirect beneficial owner’s forename and surname, date of birth, nationality and country of residence (not, however, a specific postal address);
the nature and scope of the beneficial ownership.

As the Register will be accessible to the public, the possibility for beneficial owners to apply for a limitation to inspect certain information should obtain even more attention. Such possibility is available already under the current regime and requires an overriding legitimate interest of the applicant to limit the inspection. To our experience this requirement is thoroughly scrutinized by the authorities. Therefore, to be successful, the application for a limitation of inspection must be well substantiated and ideally be supported by proper evidence.

Currently, the Register is designed as a non-public register; only certain obliged persons such as financial institutions, auditors, tax advisors, attorneys, notaries etc (for KYC due diligence purposes), public authorities (for certain statutory purposes) and persons or organizations who can prove a “legitimate interest” may inspect the Register.

Extended reporting duties, annual review

As of 10 January 2020, the annual verification and update process requires a report of changes or – in case there are no changes – a report of verification to the Register. Consequently, entities are required to actively make a statement to the Register at least once a year (even if no changes occurred). Apart from that, changes must still be reported within 4 weeks.

Currently, entities are required to at least once a year verify whether the information registered is still up to date. If the entry is up to date, no further action is required.

Updating service

As of 10 January 2020, obliged parties (such as financial institutions, auditors, tax advisors, attorneys, notaries etc) will be given the possibility to use a new “amendment update service”: Via a platform the registration number of those entities can be retrieved on a daily basis which have for the first time reported their beneficial owners to the Register or have reported changes, or – as of 10 November 2020 – submitted a compliance package or a supplement thereto.

Sanctions

As of 10 January 2020, the sanctioning provisions of the Beneficial Owners Register Act will be clarified and partly extended. This said, breaches continue to be treated as (minor) financial offences; the maximum penalty conceivable for certain cases remains to be a penalty payment of EUR 200,000 (in case of intentional conduct) or EUR 100.000 (in case of gross negligence).

Compliance-Package

From 10 November 2020, the Register of Beneficial Owners will be expanded into a central platform for the storage and exchange of KYC-relevant documents on beneficial owners.

Entities may voluntarily submit the documents required to verify their beneficial owners (the so-called “compliance package”) to the Register. This measure aims to make KYC due diligence easier and more efficient.

Only certain persons (such as financial institutions, auditors, tax advisors, attorneys, notaries etc) have access to such compliance packages, but not the public domain. In addition, it will be possible for the entities which upload a compliance package to further limit the access, for instance to a specific financial institution, or to grant access subject to an explicit ad hoc permission of the entity.

The compliance package can be provided to the Register only through a professional party representative. Prior to submitting the compliance package to the Register, such party representatives must form their own opinion and identify and verify the beneficial owners based on conclusive documents.

Depending on the ownership and control structure the following documents shall be submitted (translated into German, as the case may be):

Structure chart;
in relation to the reporting entity (as well as domestic (direct or indirect) parent entities): evidence of ownership or shareholder rights, including incorporation documentation, if required, and other evidence and documents to establish and verify the beneficial owner(s); and
in case of foreign (direct or indirect) parent entities: further information and proof of evidence of existence, ownership, partnership agreements, voting rights, control or trust relationships etc.

The documents must be up to date at the time of submission to the Register (maximum six weeks old) and are then valid for a period of twelve months.

A timely notification of changes by the party representative regarding the compliance package (review and confirmation of the completeness and correctness of the documents) extends the validity by a further twelve months.

Subordinate legal entities may “link” to the compliance package of (domestic) parent companies to keep the administrative burden and expenses low.

Conclusion

As of 10 January 2020, important changes to the Austrian Beneficial Owners Register Act will come into force. The most important change is that that the Register will become accessible to the general public. Against this background, beneficial owners with an increased risk situation should consider filing an application for a limitation of access.

The most significant medium-term change is that, as of 10 November 2020, entities can upload a compliance package to the Register, which obliged parties (for instance credit institutions) can then access via an extended excerpt from the Register.

Contact

Johannes Barbist, Partner
barbist@bindergroesswang.at

Gottfried Gassner, Partner
gassner@bindergroesswang.at

Mona Holzgruber, Attorney at Law
holzgruber@bindergroesswang.at

Please note: This newsletter merely provides general information and does not constitute legal advice of any kind from Binder Grösswang Rechtsanwälte GmbH. The newsletter cannot replace individual legal consultation. Binder Grösswang Rechtsanwälte GmbH assumes no liability whatsoever for the content and correctness of the newsletter.