Bill of law 7216A - New requirements for fiduciary arrangements: setting up by their fiduciary agent of an internal file on their beneficial owners
On 21st August 2018, the law on the information to be obtained and held by fiduciary agents (the “2018 Law”) implementing part of Article 31 of EU Directive 2015/849 of 20th May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing (the “4th AML Directive”) was published in the Luxembourg Gazette N° 702 on 21st August 2018. The 2018 Law had been adopted by Parliament on 26th July 2018 and will enter into force on 25th August 2018.
Article 31 of the 4th AML Directive indeed provides for (i) the setting up of an internal file containing relevant information on the beneficial owners (the “BO”) of fiduciary arrangements which are set up under Luxembourg law and (ii) the establishment of a central register of BOs for fiduciary arrangements (next to the central register of BOs of companies and legal arrangements, which is currently being set up by the bill of law 7217).
The requirements relating to the information to be held on the BOs in the internal files (for both corporate entities and fiduciary arrangements) have recently been slightly amended by EU Directive 2018/843 amending the 4th AML Directive (the “5th AML Directive”) while the provisions on the central BO registers have for their part been substantially amended. In addition, while the 4th AML Directive previously provided that Member States had to implement the 4th AML Directive (and thus the provisions relating to the internal files and both central registers) by 26th June 2017, the 5th AML Directive has changed the timeline in relation to the central registers and the central BO registers for fiduciary arrangements must now only be set up by 10th March 2020.
In order to ensure a swift implementation of the requirements to set up an internal file for fiduciary agents of Article 31 of the 4th AML Directive and to continue in the meantime the parliamentary works relating to the central register of BOs for fiduciary arrangements, the bill of law 7216 was divided into two separate bills of law on 29th June 2018, i.e. (i) the bill of law 7216A on requirements on information to be obtained and held on the BOs (the internal file) and (ii) the bill of law 7216B on the establishment of a central register of BOs for fiduciary arrangements.
All fiduciary arrangements subject to the law of 27 July 2003 on trusts and fiduciary arrangements shall fall within the scope of the 2018 Law.
1. New obligations applicable to fiduciary agents
The main changes brought by the 2018 Law are that fiduciary agents must obtain and hold adequate, accurate and up-to-date information on the BO (as defined under Article 1 (7) of the law of 12 November 2004 on the fight against money laundering and terrorist financing, as amended (the “2004 Law”)) of any fiduciary arrangement (subject to the law of 27 July 2003) for which they act as fiduciary agent. This information includes the identity of:
- The settlor (i.e. the principal under the fiduciary arrangement);
- The fiduciary agent(s);
- The protector, if any;
- The beneficiaries or class of beneficiaries;
- Any other natural person exercising effective control over the fiduciary arrangement.
Article 6 of the 2018 Law further provides that the fiduciary agent shall declare its status and provide the information contained in the internal file relating to the BO to obliged entities when, as fiduciary agents, they enter into a business relationship with them or execute, on an occasional basis, a transaction which exceeds the thresholds set out in Article 3 of the 2004 Law (i.e. EUR 15.000).
In addition, the fiduciary agent will be required to provide such information to the relevant authorities upon request.
2. Supervisory and sanctioning powers of the relevant authorities
The 2018 Law allows the supervisory authorities to have access to any document in any form whatsoever and to receive or take copies of it, to request information from any person and, if necessary, to summon any person subject to their respective supervisory powers to obtain information from such person and to carry out on-site inspections or investigations.
The supervisory authorities are also empowered to impose administrative sanctions on persons subject to their respective supervisory powers, as well as on members of their governing bodies, effective managers or other persons responsible in case of non- compliance with the above obligations. The sanctions may range from a simple warning to an administrative fine of up to twice the amount of the benefit obtained from the infringement, where this can be determined, or of up to EUR 1.250.000.
3. Next steps
The bill of law 7216B on the central register of BOs of fiduciary arrangements and the bill of law 7217 on the central register of BOs of corporate and legal entities are both still under discussion at this stage in Parliament. A newsflash will be released regarding these two texts once they have been adopted.