Clarifications from the CSSF on UBO identification and verification

The CSSF has published Circular 19/732 (the Circular) with some clarifications on the identification and verification of the identity of the ultimate beneficial owner(s) (UBO(s)) in the context of prevention of money laundering and terrorist financing. This follows the requirements imposed by AML4 ¹ and the obligations as transposed into Luxembourg law ² .

The purpose of the Circular is to provide guidance to all professionals subject to Anti-Money Laundering (AML) and Counter Terrorist Financing (CTF) supervision of the CSSF on the practical implementation of the identification requirements of UBO(s). The Circular gives indications regarding the definition of a UBO and the reasonable measures that should be taken to verify the identity requirements.

In brief:

• The Circular outlines the measures to be taken and information to be collected by the professionals to satisfy their AML identification and verification requirements. Recourse should be made on a non-exclusive basis to publicly available records with information on ultimate beneficial owners, which include, amongst others, information contained in the national register on beneficial ownership.

• The Circular also provides for clarification as to the exemption applicable to companies whose shares are admitted to trading on regulated markets. The legal provisions provide that professionals are not required to identify and verify the identity of their UBO(s). The exemption only applies where the customer is an issuer of shares which are admitted to trading on a regulated market (as defined by MiFID) in the Union or on a third country market subject to disclosure obligations for major shareholders which are subject to equivalent international standards which ensure adequate transparency of ownership information.

• The Circular provides for further guidance on the following threefold procedure to be followed to determine ultimate beneficial ownership, as provided for in the Luxembourg Law.

  • Identify the natural person(s) who directly or indirectly hold(s) or control(s) 25% plus one, of the shares, voting rights or ownership in an entity;
  • Where no natural person can be identified under any of the scenarios under (i), identify any person who controls the legal entity via other means; and
  • After having exhausted all possible means and provided that there are no grounds for suspicion, where no person under point i) and ii) is identified, or if there is any doubt that the person(s) identified is/are the beneficial owner(s), identify any person who hold the position of senior managing official (dirigeant principal).

• According to the Circular, the methods (i) and (ii) are cascading methods that have to be fully completed and formalised before recourse is made to method (iii). The third method is a default option to be applied only where methods (i) and (ii) have been followed and do not permit to identify the UBO(s). The Circular provides for a list of non-exhaustive factors which should be considered when determining whether the natural person exercises effective control over the customer and also clarifies what is contemplated by “senior managing official”. The determination of the senior managing official is to be made on a case by case basis, considering, for example, whether the person actually performed senior managing responsibilities and has knowledge of and sufficient connection to the legal entity.
• Finally, the Circular sets out the main relevant indicators that could reveal efforts to conceal beneficial ownership and which are further described in the report of the Financial Action Task Force Egmont Report Group on concealment of beneficial ownership information dated July 2018 and annexed to the Circular.

¹ Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending Regulation (EU) No 648/2012 of the European Parliament and of the Council, and repealing Directive 2005/60/EC of the European Parliament and of the Council and Commission Directive 2006/70/EC (the AML4).

² The Luxembourg law of 12 November 2004 on the fight against money laundering and terrorism financing, as amended (the Luxembourg law).