Who is in scope?
AMLR imposes beneficial ownership registration requirements, already existing under AMLD, on:
- legal entities established in a third country; and
- persons involved in foreign legal arrangements, i.e., trustees in an express trust (defined under the AMLR as “a trust intentionally set up, inter vivos or on death”) or persons with an equivalent position in an arrangement which has a similar structure or function to an express trust, registered and/or established in a third country;
(together, the Foreign Entities);
in the event where they:
- enter into a business relationship with an obliged entity in the EU;
For this purpose, a “business relationship” comprises any a business, professional or commercial relationship connected with the professional activities of an obliged entity, set up between an obliged entity and a customer with an element of repetition or duration, including in the absence of a written contract, either at the time of the initial contact between the parties or subsequently.
An “obliged entity” within the meaning of the AMLR comprises a series of entities, including but not limited to credit institutions, financial institutions, audit and tax professionals, legal professionals, trust or company service providers, real estate professionals, crowdfunding service providers, etc.
- acquire (directly or through intermediaries) real estate in the EU;
- acquire (directly or through intermediaries) motor vehicles (with a value of at least EUR 250,000 or equivalent), watercraft or aircraft (with a value of at least EUR 7,500,000 or equivalent), for non-commercial purposes;
- are awarded a public contract for goods or services, or concessions by an EU contracting authority.
Note that the concept of “legal entity” is not further defined and that the relevant AMLR article does not provide for exclusions for specific types of entities, meaning there is no exception, for instance, for foreign investment funds investing in the EU.
New beneficial ownership registration obligations
The Foreign Entities are required under the AMLR to submit beneficial ownership information to the central beneficial owner registry of any of the EU Member State concerned by any of the above events (for Luxembourg, for instance, the Register of Beneficial Owners (Registre des bénéficiaires effectifs or RBE)).
Such information comprises notably:
- the personal details (name, surname, place and date of birth, residential address, nationality, number of identity document, unique personal identification number) of their beneficial owner(s);
- the nature, extent and date of acquisition of beneficial interest in the relevant Foreign Entity (ownership control or control via other means);
- information on the Foreign Entity (legal form and name, address, names and personal details of legal representatives, etc.);
- description of ownership and control structure of Foreign Entity (particularly where multiple entities/arrangements are involved); and
- specific information in the case of certain trusts and similar arrangements.
Where multiple Member States are involved in a particular transaction, proof of registration of the beneficial ownership information of a Foreign Entity in the central registry of one EU Member State shall be deemed as sufficient for the purposes of AMLR.
The relevant registrations in the central beneficial owner registry and submission of supporting documents (including in any case a statement setting out the event triggering the registration requirement on behalf of a Foreign Entity) must be completed prior to the start of the relevant business relationship and/or completion of the acquisition in question and/or signature of public contract (as the case may be).
Information must be kept up to date by the Foreign Entity, subject to certain exemptions, throughout the duration of the respective business relationship or contract or for as long as such Foreign Entity holds the acquired real estate in the EU.
The rationale behind the new requirements
The new requirements have been imposed in an attempt to mitigate the risks posed by Foreign Entities active in the EU, so that they are subject to equivalent transparency levels and monitoring as the Union-based entities and arrangements.
As the intention of the EU regulator is not to discourage Foreign Entity investments in the EU but rather to further enhance and harmonise the AML framework across all EU Member States and ensure that information on the beneficial ownership of Foreign Entities is readily available, exemptions have been provided for under AMLR.
For instance, where legal entities established in a third country wish to enter into a business relationship with an obliged entity (within the meaning of AMLR), they would only have to comply with the above beneficial ownership registration formalities to the extent that (i) the obliged entity in question is associated with medium-high or high money laundering (ML) / terrorist financing (TF) risks and/or (ii) the Foreign Entity is associated with a legal entity category / sector with medium-high or high ML/TF risks (as per the relevant EU or national risk assessment).
Foreign Entities will be dependent on the EU’s and individual obliged entities’ risk assessment of sectors and activities.
What will Foreign Entities have to do?
The above obligations will become applicable as from 10 July 2027.
Foreign Entities already owning real estate in the EU will also have to submit their beneficial ownership information (along with the requisite supporting documentation) to the central beneficial owner registries concerned by 10 January 2028.
Foreign Entity that acquired real estate in the EU prior to 1 January 2014 shall be exempted from the registration obligation.
The EU Commission shall at its own discretion, on a risk-based approach and upon a relevant notification by the EU Member States concerned extend the registration requirement to Foreign Entities engaged in prior acquisitions of real estate in the EU and/or business relationships with obliged entities which are ongoing on 10 July 2027.
Impact on EU obliged entities
EU obliged entities intending to enter into a business relationship with a Foreign Entity will be obliged to inform such entities if the conditions for the registration requirements are met, and request a certificate of proof of registration or equivalent.