We would like to inform you about the recent significant development in the Anti-Money Laundering (AML) legislation in the Slovak Republic. Several new obligations were introduced, however, within the scope of this limited information, we would like to focus on a specific duty to identify ultimate beneficiary owners which is applicable to all legal persons (companies, associations, etc.).
The concept of ultimate beneficiary owners, although existing for some time already, came into prominence more than two years ago due to the enactment of the new legislation aimed at fighting the long prevalent murky relationships in public procurement or more commonly, in any area where public money is spent. Every entity intending to receive public funds exceeding certain and low thresholds, have been requested to identify and register with Register of Public Sector Partners its ultimate beneficiary owners, i.e. persons who are legally considered the major stakeholder, either directly or indirectly, of that particular entity. Otherwise, he could face dire consequences. The registration process of the Register of Public Sector Partners is a sophisticated one requiring great attention to details and sometimes almost investigative efforts on part of the independent registrars – which are generally attorneys at law.
Fortunately, the scope of the new legislation and activities required to be performed within the area of anti-money laundering are narrower and are more-so regarded as being easier to fulfill this time, despite representing an administrative burden to be borne by business entities.
What is required?
As of March 2018, each and every legal person, except for the entities already registered in the so-called Register of Public Sector Partners, need to identify its ultimate beneficiary owners and maintain an internal document evidencing that such identification took place – including a list of its ultimate beneficiary owners. This document needs to be held up to date and archived for five years. The document can be executed either in an electronic or paper form, both forms posing equal significance.
Additionally, as of the 1 November 2018, each new company registered in the commercial register must also register its ultimate beneficiary owners. This obligation also applies to existing companies – whereas the registration needs to be initiated by the end of the next year at the latest (31 December 2019). Despite being part of the commercial register, the information on ultimate beneficiary owners will not be publicly accessible and will be accessible solely to specific state authorities such as police, tax authorities, courts, etc. The registration process is no different than any other registration done in the commercial register – a specific form to be filled out and filed was prepared by the Ministry of Justice and is publicly available. No specific documents confirming that the identification of the particular ultimate beneficiary owner was done properly is to be required to submit for registration, thus leaving this registration and its authenticity entirely within the responsibility of the statutory bodies of the company.
As is the case of any obligation imposed by the state, also failure to comply with the obligations to identify ultimate beneficiary owners under the procedures specified above are sanctioned. Ironically, the failure to perform the internal identification bears risk of a larger fine exceeding EUR 200,000, compared to the fine which can be imposed for the failure to maintain proper registration in the commercial register – up to EUR 3,310 (however, in this case, not only can the company itself be subjected to the fine, but the actual members of the statutory body can as well – though the practice of sanctioning the statutory bodies directly is yet to become more popular with the state authorities).
Who is actually the ultimate beneficiary owner of a company?
Put simply, in case of the majority of the “ordinary” companies it can be summed up as a natural person owning, directly or indirectly, solely or jointly with others, holding a minimum of 25 % stake in a company. In the case where no natural persons fitting such criteria can be identified or in case of companies with shares publicly traded at recognized stock exchanges or local companies owned by such companies – the local management will be registered instead of the then non-existing ultimate beneficiary owners.
Should you need any further information or help with implementation of the above obligations, please do not hesitate to contact us.