EU AML DIRECTIVE 2015/849 (as amended by Directive (EU) 2018/843)
Legal requirements. The EU AML Directive 849/2015 (as amended) requires under Art. 30 (1), (2) and (4) that corporate and other legal entities incorporated within the territory of Member States (i) obtain and hold adequate, accurate and current information on their beneficial ownership, including the details of the beneficial interests held, and (ii) they communicate the information about beneficiary ownership and beneficial owners to a central register in each Member State, for example a commercial register, companies register or a public register in a way that such information about beneficial ownership and beneficial owners is adequate, accurate and current. The aforementioned Article of the EU AML Directive 849/2015, as amended, uses the term „beneficial ownership“ (Art. 30 (2) and (4)) in relation to the disclosure and registration obligations of legal persons towards authorities keeping the registers of beneficial owners.
CERTIFIX allows via the CERTIFIX Software any legal person which follows its „step-by-step“ approach to perform the disclosure of ownership and control structure up to the beneficial owner(s)) (beneficial ownership (interest)) in a way that this information is adequate, accurate and current as required by the EU AML Directive. To be adequate, accurate and current means, first, that the beneficial ownership (interest) was identified in accordance with FATF Beneficial Ownership Guidance (see below) and OECD Beneficial Ownership Toolkit (see also below): this includes performance of a verification that (i) at each ownership (shareholding or membership level) the composition of the full amount of 100 % of corporate interest at that level was identified; that (ii) controlling character of one or more corporate interests within that full 100 % amount of corporate interest and their direct owners were determined; and finally that (iii) presence or absence of presence of a nominee acting on behalf of the controlling corporate interest(s) owner(s) was established. Second, to be adequate, accurate and current means that all information under previous sentence was evidenced by the relevant evidencing documents: a relevant document in this respect means a document of a constitutive character, that is a document, which the law applicable to the corporate subject to which this document relates, determines as the decisive source of information about the subject and its interest. For a document to be constitutive in this context means that it has the strongest legal force of all documents which may contain the same information on corporate subject and its interest; in other words, a document has a constitutive character if it cannot be overruled by any other document which may show a different information about the same corporate subject and same corporate interest than the first document.
CERTIFIX also allows legal persons to perform the disclosure of the ownership and control structure and beneficial owners only once for the whole structure (group) and then to submit the once performed disclosure to all different authorities and institutions which are obliged by law to require it, such as banks, financial institutions and other obliged entities under the AML Directive, courts and other authorities keeping the register of beneficial owner(s), public contractors, providers of EU funds or other subsidies etc.
Banks, financial institutions and other obliged entities
Legal requirements. The EU AML Directive requires in its Art. 13 (1) (b), (d) so-called obliged entities – that is banks, other financial institutions and designated non-financial bodies and professions (advocates, notaries real estate brokers etc.) to perform customer due diligence measures, which include:
- identification of the beneficial owner and taking reasonable measures to verify that person’s identity so that the obliged entity is satisfied that it knows who the beneficial owner is, including, as regards legal persons, trusts, companies, foundations and similar legal arrangements, taking reasonable measures to understand the ownership and control structure of the customer, and
- conducting ongoing monitoring of the business relationship […] including where necessary the source of funds and ensuring that the documents, data or information held are kept up-to-date.
To perform a customer due diligence measures in relation ownership and control structures up to the beneficial owner(s) may be a difficult and time consuming exercise. Not only because ownership and control structures can often be very complex, but also since the EU AML Directive 849/2015 obliges banks, other financial institutions and designated non-financial bodies and professions to control something – namely an „ownership and control structure“ – which it does not properly define.
CERTIFIX helps the so-called obliged entities under AML rules to solve these problems. On the one hand, if upfront a bank or other financial institution or a designated non-financial body or profession, requires its clients – legal persons to obtain TransparencyID and CertifixID, that is to certify their „ownership and control structure“ up to beneficial owner(s) via CERTIFIX Software, it can be already sure that it has fulfilled its obligations under Art. 13 (1) (b), (d) of the AML Directive. On the other hand, thanks to having TransparencyID and CertifixID a bank clerk or a responsible employee of a financial institution or a designated non-financial body or profession can – in the CERTIFIX Database via entering the TransparencyID or CertifixID of its client – check any time the information about client‘s „corporate and ownership structure“ up to the beneficial owner(s) and documents evidencing that information.
(NOTE: see above as to how CERTIFIX verifies adequacy, accuracy and current character on beneficial owner(s) and their beneficial ownership interest and below as to how CERTIFIX can reveal discrepancies between information registered in central registers of beneficial owners and legally valid and accurate information on beneficial owner(s) and their beneficial ownership interest).
Courts and other authorities keeping registers of beneficial owner(s)
Legal requirements. The EU AML Directive requires in Art. 30 (4) Member States that the information held in the central register of beneficial owner is adequate, accurate and current, and shall put in place mechanisms to this effect. Such mechanisms shall include requiring obliged entities and, if appropriate and to the extent that this requirement does not interfere unnecessarily with their functions, competent authorities to report any discrepancies they find between the beneficial ownership information available in the central registers and the beneficial ownership information in the relevant documents. In the case of reported discrepancies, Member States shall ensure that appropriate actions be taken to resolve the discrepancies in a timely manner and, if appropriate, a specific mention be included in the central register in the meantime.
CERTIFIX represents such a mechanism able to identify discrepancies between the beneficial ownership information available in the central registers and the beneficial ownership information available to them. That information about beneficial owner and beneficial ownership interest is accurate means that it is evidenced by the relevant evidencing document of constitutive nature that is the document with the highest legal force in relation to information which it evidences (see above): whereas CERTIFIX Software accepts only constitutive documents to evidence the information on beneficial owner(s) and their beneficial ownership interest, by contrast, central registers of beneficial owners either do not require any evidencing documents or accept whichever evidencing documents to prove the information on beneficial owners(s) and their beneficial ownership interests registered therein. Hence, in the absence of evidencing by the constitutive documents of the information on beneficial owners(s) and their beneficial ownership interests in the central registers of beneficial owner(s), there is a higher or lower likelihood that such information registered in the central registers of beneficial owner(s) is inaccurate; by contrast, the information on beneficial owners(s) and their beneficial ownership interests registered in CERTIFIX is accurate as it is always evidenced and always by the relevant constitutive documents. Thus, CERTIFIX Software and the CERTIFIX Database can serve as a verification mechanism against which the information on beneficial owners(s) and their beneficial ownership interests in central registers of beneficial owners can be checked and which can identify discrepancies between the information on beneficial owners(s) and their beneficial ownership interests in the central registers of beneficial owners and the legally valid and accurate information thereon.
For your ease, you can check the conformity table between the CERTIFIX Universal definitions used by CERTIFIX Software and:
- EU AML Directive 849/2015, as amended by Directive 843/2018 (HERE)
FATF GUIDANCE ON TRANSPARENCY AND BENEFICIAL OWNERSHIP OF OCTOBER 2014 and OECD BENEFICIAL OWNERSHIP IMPLEMENTATION TOOLKIT OF MARCH 2019
Legal requirements. Although the EU AML Directive uses the terms „ownership and control structure“ and „beneficial ownership (interest)“, it does not define either of these two terms. As a result, legal persons, which are obliged under the EU AML Directive to know and register both „ownership and control structure“ and „beneficial ownership (interest)“ with different institutions, the legal persons usually do not exactly know how to correctly disclose either the „ownership and control structure“ nor the „beneficial ownership (interest)“. However, some useful guidance on the meaning of the terms „ownership and control structure“ and „beneficial ownership (interest)“ and how to fulfil the obligation to disclose both of them correctly is contained in the FATF Guidance on Transparency and Beneficial Ownership of October 2014 and in the OECD Beneficial Ownership Implementation Toolkit of March 2019.
CERTIFIX Software is designed in a way as to use the relevant elements of both the FATF Guidance and the OECD Toolkit in order to solve the described problems, that is to fill up the gaps in the definitions of the terms „ownership and control structure“ and „beneficial ownership (interest)“ under the EU AML Directive and help legal persons to do their correct and accurate disclosure. CERTIFIX Software translates the detailed explanations of the FATF Guidance and the OECD Toolkit on how to properly disclose ownership and control structure (up to the beneficial owner(s)) and beneficial ownership (interest) in a practical and understandable „step-by-step“ manner. Thus, CERTIFIX Software allows any legal person which follows this „step-by-step“ approach to perform the disclosure of ownership and control structure (up to the beneficial owner(s)) and beneficial ownership (interest) in compliance with EU AML Directive, FATF Guidance and the OECD Toolkit without having to know the disclosure requirements of the EU AML Directive and explanations of the FATF Guidance and the OECD Toolkit.
For your ease, you can check the conformity table between the CERTIFIX Universal definition used by CERTIFIX Software and:
- FATF Guidance of October 2014 (HERE),
- OECD Toolkit of March 2019 (HERE)
PUBLIC PROCUREMENT DIRECTIVE 2014/24/EU
Legal requirements. The EU Public Procurement Directive 2014/24 requires in its Art. 57 (1) that contracting authorities (public bodies in EU Member States) exclude from a participation in procurement procedures economic operators bidding for public contracts (hereinfter the the bidder(s) if they are concerned in a qualified manner by an exclusion ground listed in that Article or if such exclusion ground concerns:
- a member of the administrative, management or supervisory body of the bidder, or
- a person who has powers of representation over the bidder, or
- a person who has] decision or control [in the bidder] (that is any person in the ownership and control structure up to the beneficial owner(s) of the bidding economic operator).
An example of an exclusion ground is when any of the aforementioned persons is a person convicted by a final judgment of certain criminal act or is in one or more of the situations referred to in letters (a) to (f) of paragraph 1 of Art. 57 of the Public Procurement Directive*. The public contractor can require from the bidder both to prove the absence of any exclusion ground and the disclosure of all persons with powers of decision or control over the bidder (the persons in the ownership and control structure up to the beneficial owner) in order to be able to check whether any of the persons with decision or control power over the bidder is not concerned by any of the aforementioned exclusion grounds. The European Single Procurement Document can prove compliance of the bidder with a number of requirements of the Public Procurement Directive, but it cannot by definition give any information about persons with decision or control power over the bidder (persons and entities within the ownership and control structure, including the beneficial owner) or give assurance that such persons with decision or control power were determined and evidenced correctly. Hence, the existence and identity of persons with decision or control power over the bidder, that is persons within the ownership and control structure of the bidder including its beneficial owner, have to be proven by other means.
Unlike the European Single Procurement Document, CERTIFIX Software coupled with the TransparencyID and Certifix ID can provide information and evidence of persons with powers of decision and control over the bidder. Similarly to the possibility of the public contractor to demand from bidders compliance with relevant technical, qualitative or organisational standards subject to certification, the public contractor can also ask bidders to provide certification of compliance with the rules on transparency of ownership and control structure (up to the beneficial owner*) contained in AML instruments**, since the latter certification is able, for example, via the TransparencyID or CertifixID, to ensure the accurate identification and evidencing of persons with decision-making and control powers over the bidder. The public contractor can stipulate in each tender offer that it would require from the bidders the TransparencyID or CertifixID certification so that the public contractor can assess the existence of exclusion criteria in respect to persons with powers of control or decision over the bidder. Alternatively, since in contrast to technical standards the ownership and control transparency standard will apply to any bidder for a public contract, the public contractor can make on its website a general statement that it requires or recommends to potential bidders in any public competition to have TransparencyID and/or CertifixID. Finally, the public contractor, even if it does not require ownership and control structure certification (that is of persons with powers of decision or control) of bidders, can always check the public TransparencyID Database or CERTIFIX Database to see if by chance it would not be possible to find there in respect of the winning bidder or other bidders the persons which have power of decision or control in them within the framework of the disclosed ownership and control structure there.
* The beneficial owner is defined in Art. 3 (6) of the EU AML Directive.
** EU AML Directive, FATF Guidance on transparency and beneficial ownership of October 2014 and OECD Beneficial Ownership Implementation Toolkit of March 2019 (see above).
FINANCIAL REGULATION (EU) 2018/1046 ON THE FINANCIAL RULES APPLICABLE TO THE GENERAL BUDGET OF THE UNION
Legal requirements. Financial (EU budget) Regulation 2018/1046/EU requires in its Art. 136 (1), (4) and Art. 137 (2) (b) and (4) that the responsible authorising officer excludes from a participation in granting competition economic operators bidding for money from the EU budget (hereinafter the recipient entity or potential recipient entity) if they are concerned in a qualified manner by an exclusion ground listed in that Article or if such exclusion ground concerns:
- a member of its administrative, management or supervisory body of the (potential) recipient entity, or
- a person that has powers of representation of such entity, or
- decision or control of such (potential) recipient entity, including persons and entities within the ownership and control structure and beneficial owners, and appropriate evidence that none of those persons are in one of the exclusion situations referred to in points (c) to (f) of Article 136 (1).
The authorising officer can require from the (potential) recipient entity both to prove the absence of any exclusion ground and the disclosure of all persons with powers of decision or control over the recipient entity (the ownership and control structure up to the beneficial owner) in order to be able to check whether any of the persons in the ownership or control structure of the (potential) recipient entity or its beneficial owner is not concerned by any of the aforementioned exclusion grounds under Art. 136 (1) (c) to (f) of the Financial Regulation. The declaration under Art. 137 (1) according to which the (potential) recipient entity can prove compliance with a number of requirements of the Financial Regulation does not give any information on persons with decision or control power over (potential) recipient entity within its ownership and control structure, including the beneficial owner, or give assurance that those persons were determined and evidenced correctly. Hence, the existence and identity of person with decision or control power over the (potential) recipient, including persons and entities within the ownership and control structure and beneficial owners, entity have to be proven by other means. The Financial Regulation, in addition, obliges in Art. 137 (4) (a) authorising officers to check the persons and entities in the ownership and control structures of (potential) entities and their beneficial owners from national databases accessible free of charge.
CERTIFIX Software coupled with the TransparencyID and Certifix ID and the CERTIFIX Database can provide free of charge the information and evidence about persons with powers of decision and control over the (potential) recipient, including persons and entities within its ownership and control structure and beneficial owners. Similarly to the possibility of the authorising officer to demand from the (potential) recipient entity compliance with relevant technical or quality or organisational standards subject to certification, the authorising officer can also ask (potential) recipient entities to provide certification of compliance with the rules on transparency of ownership and control structure (up to the beneficial owner*) contained in AML instruments**, since the latter certification is able, for example via the TransparencyID or CertifixID, to ensure a correct identification and evidencing of the persons with power to decide or control the (potential) recipient. The institution granting money from the EU budget can stipulate in each grant or public contract or other similar contract offer that it would require from the (potential) recipient entity the TransparencyID or CertifixID certification so that the authorising officer can assess the existence of exclusion criteria in respect to persons with powers of control or decision over the recipient entity within its ownership and control structure, including the beneficial owner. Alternatively, since unlike technical standards the ownership and control transparency standard will apply to any (potential) recipient entity, the institution granting money from the EU budget can make on its website a general statement that it requires or recommends to potential recipients to have TransparencyID and CertifixID. Finally, the institution granting money from the EU budget, even if it does not require ownership and control structure certification in any way from (potential) recipient entities, shall always check the public TransparencyID Database or CERTIFIX Database or NON.CERTIFIX Database to see if by chance it would not be possible to find there in respect of the (potential) recipient entity the persons which have power of decision or control in them, within the framework of the disclosed ownership and control structure there.
* The beneficial owner is defined in Art. 3 (6) of the EU AML Directive.
** EU AML Directive, FATF Guidance on transparency and beneficial ownership of October 2014 and OECD Beneficial Ownership Implementation Toolkit of March 2019 (see above).