Financial Crime World

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Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) Regulations: Identifying Ultimate Beneficial Owners

The Luxembourg Financial Regulator (CSSF) has issued Circular CSSF 19/732, outlining regulations for Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT). This article highlights the main points related to identifying Ultimate Beneficial Owners (UBOs) in trusts, legal entities, and companies.

Trusts

When it comes to fiducies and trusts, control means having the power to take certain actions such as:

  • dealing with trust property
  • terminating or varying a trust
  • adding or removing beneficiaries
  • appointing or removing trustees

The threefold procedure is used to determine ultimate beneficial ownership in trusts:

Identifying Natural Persons

  1. Identify natural persons who directly or indirectly hold or control a sufficient percentage (25% plus one) of the shares, voting rights, or ownership in an entity.
  2. If no natural person can be identified under (i), identify any person who controls the legal entity via other means.

Identifying Senior Managing Officials

After exhausting all possible means and providing that there are no grounds for suspicion, if no person is identified under points (i) and (ii), or if there is any doubt that the person(s) identified is/are the beneficial owner(s):

  • Identify any person who holds the position of senior managing official (dirigeant principal).

Legal Entities

The threefold procedure is also used to determine ultimate beneficial ownership for legal entities.

  1. Measure (i) and (ii) are not alternative options but cascading measures, meaning assessments under both (i) and (ii) have to be fully completed before resorting to measure (iii).

Companies

Legal entity customers that do not fulfill the criteria mentioned earlier are subject to the identification of their ultimate beneficial owner(s) on the basis of the threefold procedure.

The threshold approach is used, where a natural person owning more than 25% (i.e., at least 25% plus one) percent of shares or voting rights is considered an ultimate beneficial owner.

Important Notes

  • These regulations are subject to change and may not be comprehensive or up-to-date.
  • If you’re dealing with AML/CFT compliance, it’s essential to consult the latest circulars and guidelines from the CSSF or other relevant regulatory bodies.