Offshore

Charting Beneficial Ownership Registers In Luxembourg

Andrew Knight and Evi Koutsioumpa, 8 May 2018

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Sanctions
Criminal penalties of between EUR 1,250 and EUR 1.25 million may be imposed:

● On entities concerned or on their representatives (which might include their directors) who do not register the information in the REBECO within the required timeframes, who knowingly provide incorrect or incomplete partial information or who fail to obtain and keep the information at their registered office,

● On self-regulatory bodies or Professionals if they intentionally request access to the information contained in the REBECO outside the scope of their functions.

FIDUCIARY CONTRACTS
The proposed rules dealing with the keeping of information and the maintaining of a register concern fiduciary contracts as described in the 27 July 2003 Law relating to trusts and fiduciary contracts (“Fiduciary Contracts”). A Fiduciary Contract is a contract by which a person, the fiduciant, agrees with another person, the fiduciary, who becomes the owner of certain assets subject to the terms of the contract. A typical example of a Fiduciary Contract in Luxembourg would be in the context of a securitisation structure where the fiduciary holds the assets for the bond holders.

General obligations of fiduciaries
Luxembourg fiduciaries are required to:

● Obtain, hold, and keep up-to-date information in relation to the beneficial owners of the Fiduciary Contract in respect of which they are acting as fiduciaries. Such information is to be kept for a period of five years following the cessation of their activities in relation to such contract;

● Provide information on the beneficial owners of the fiduciary arrangement to certain public authorities upon request;

● Inform Professionals as to their status as fiduciaries/trustees and provide them with the relevant information when entering into a business relationship with them and or when carrying out a transaction that exceeds the thresholds of the AML Law.

For these purposes, the beneficial owners comprise the settlor, the fiduciary, the protector (if any), the beneficiaries or class of beneficiaries and any other person exercising effective control over the Fiduciary Contract. The fulfilment by the fiduciaries of their obligations is monitored by the relevant supervisory authority as described in the AML Law.

The register
A register of Fiduciary Contracts will be set up and managed by the Administration de l’Enregistrement et des Domaines (AED). Any Fiduciary Contract that gives rise to Luxembourg tax consequences must be registered by the fiduciary on the register of Fiduciary Contracts. The register will contain details regarding the Fiduciary Contract and its beneficial owners. The Fiduciary Contract must be registered within a month following the event that requires the submission or modification of the information but fiduciaries will have up to six months after the entry into force of the Bill of Law to register any pre-existing

Fiduciary contract
The AED has the responsibility for monitoring compliance by a fiduciary of its obligations in relation to the register of Fiduciary Contracts. Access to the information contained in the Register of Security Contracts is available only to competent public authorities, including but not limited to the State Prosecutor, the Commission de Surveillance du Secteur Financier (CSSF), the Commissariat aux Assurances (CAA) and the tax authorities. 

Sanctions
A variety of administrative sanctions including but not limited to fines between €250 and €250,000 may be imposed by the AED as part of its enforcement of the rules relating to the register of Fiduciary Contracts.

Final thoughts
These transparency rules come on top of the introduction of FATCA and the Common Reporting Standard (CRS) and will apply to an even wider range of Luxembourg entities and fiduciaries all of whom will need to take on this additional compliance burden. To some extent the information to be made available will duplicate that which is already exchangeable under the CRS. Those affected can perhaps take some heart from the fact that, compared with some of its EU partners, Luxembourg is proposing to impose greater restrictions on the accessibility of this information to the public.

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