The Beneficial Ownership Register

The Isle of Man has worked tirelessly over the last two decades with international bodies and individual nations with the objective of stamping out terrorist financing, corruption, tax evasion and money laundering. The introduction of the Beneficial Ownership Register is another area where the Manx Government is cooperating and contributing to the fight against illicit activities.

The Isle of Man has worked tirelessly over the last two decades with international bodies and individual nations with the objective of stamping out terrorist financing, corruption, tax evasion and money laundering. The introduction of the Beneficial Ownership Register is another area where the Manx Government is cooperating and contributing to the fight against illicit activities.

There has been much discussion and debate over the last few years surrounding the disclosure of the Beneficial Ownership of companies and how transparent and compliant the Isle of Man should be. These discussions were driven by various bodies after initially being discussed at the G8 summit in 2013. This prompted the Isle of Man Cabinet Office to issue a consultation paper in June 2014. Over the next two years there were a number of key developments which culminated in the United Kingdom committing to full transparency of Beneficial Ownership in 2016. The Isle of Man Government have said right from the outset that we should be as transparent as possible but many from the financial services industry have been concerned about the repercussions of this policy.

What is a Beneficial Owner?

A Beneficial Owner is a natural person who ultimately owns or controls over 25% of a legal entity to which the Act applies, in whole or in part, through direct or indirect ownership or control of shares or voting rights or other ownership interest in that entity, or who exercises control via other means (FSA, 2017). This definition is intentionally broad as it seeks to capture all of those individuals who hold any defined controlling interest through whatever means in the legal entity concerned.

Many people looking at the shareholders register of a company will assume those persons listed will be the legal owner of the shares entitled to receive dividends and vote in meetings of members. This is not always the case. It is relatively common for Beneficial Owners to appoint a nominee to hold the shares in their name. This is completely legal and is often used simply to maintain confidentiality so others are not aware of the owner’s investment decisions.

Objectives

The purpose of the new changes are to primarily ensure that the Isle of Man meets acceptable international standards of anti-money laundering and countering of terrorist financing by maintaining a centralised database of corporate beneficial ownership, which in time will hopefully aid those combatting financial crime. With a small number of exceptions, the new regime applies to all legal entities incorporated, registered or established in the Isle of Man.

A Nominated Officer, either an individual or a Corporate Service Provider (“CSP”), must be appointed to every organisation. They will have certain responsibilities under the Act for maintaining and reporting Beneficial Owner information.

There have been concerns raised by many CSPs about the central register of company ownership because it adds an additional reporting burden for all companies. However, this information is already recorded under anti money laundering legislation which can be accessed by law enforcement agencies through a formal request.

What is the duty of the Nominated Officer/CSP?

Where any Beneficial Owner holds more than 25% of the Beneficial Ownership of a legal entity to which this Act applies, that person is a registrable beneficial owner and the nominated officer/CSP must submit the required details of each registrable beneficial owner to the Department to be held in the Isle of Man Database of Beneficial Ownership.

Who can access the Register of Beneficial Ownership?

The legislation stops well short of a public register. The database will be accessible only by certain Government departments and statutory bodies for a permitted purpose. The lack of public access to the information should ensure that most legitimate concerns in respect of confidentiality should be largely allayed. However, it must be noted that, as with all electronic data, there will be a central electronic database that could be subject to hacking or malicious theft.

As most other comparable jurisdictions are implementing similar or even more onerous legislation, it would seem to be futile to consider moving structures away from the Isle of Man in order to avoid compliance, and as with all such recent legislation, the vast majority of company owners should have no reason to be concerned about this change.

Conclusion

The Beneficial Ownership Register is yet another measure which has been introduced with the intention of preventing those with illicit intentions achieving their objectives. Time will tell if the additional administrative burden imposed on all companies and individuals will help in achieving this purpose.

Further information

Should you require further information, please contact Basil Bielich on +44 (0) 1624 626586 or email him at bbielich@burleigh.co.im.

Sources

Isle of Man Government

Isle of Man Financial Services Authority

Peregrine Corporate Services Limited is licensed by the Isle of Man Financial Services Authority.

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