Keeping information about beneficial owners
Anti-money laundering laws require all legal entities to keep records and disclose information about their beneficial owners.
Who is referred to as beneficial owner?
A beneficial owner is an individual who directly or indirectly owns (or with a majority equity holding of more than 25%) a legal entity or is able to control its actions.
The law does not specify what controlling the actions of a legal entity entails so general directors or sole executive bodies may be referred to as beneficial owners.
What specific obligations related to beneficial owners are imposed on legal entities?
Legal entities must:
- Have information about beneficial owners at their disposal;
- Take the necessary measures available in the circumstances to ascertain certain information about their beneficial owners;
- Record and update information about beneficial owners regularly, at least once a year. To comply with the update period requirement, the date of information recording should be specified, and also monitor that the next update is made no later than one year after the date of information recording;
- Keep the information received about their beneficial owners and about the measures taken to ascertain the information about beneficial owners for at least 5 years from the date of receipt.
What legal entities are subject to the law?
The obligation provided by law to ascertain beneficiary owners does not apply only to:
- Russian state authorities, local authorities, all institutions under them, state extra-budgetary funds, state corporations or organizations with more than 50% of their shares owned by state or local authorities;
- International organizations, foreign states or administrative territorial units of foreign states with independent legal capacity;
- Issuers of securities on-exchange trading which disclose information in accordance with Russian laws on securities;
- Foreign organizations whose securities are listed on a foreign exchange included in a list approved by the Bank of Russia.
So all other legal entities, including commercial organizations in the form of LLC (OOO) and JSC (AO) must fulfill the requirements of the law.
Do all companies have beneficial owners?
Often, the ultimate owner of an organization owns less than 25% of the organization’s share capital. In such case, in the absence of other signs, the organization has no beneficial owner.
What information about beneficial owners must be ascertained?
The law requires legal entities to ascertain the following information:
- Surname, name, patronymic (if any);
- Date of birth;
- Details of identity document;
- Migration card details;
- Details of document entitling foreign citizen or stateless person to stay or reside in Russia;
- Address of residence (registration) or stay;
- Taxpayer Identification Number (INN), if any.
For legal entities:
- Legal form;
- Taxpayer Identification Number (INN) or code of foreign organization (for legal entities registered under Russian law);
- Main Registration Number (OGRN) and address of legal entity (for legal entities registered under foreign law);
- Registration number;
- Place of registration;
- Address of legal entity in the country of registration.
What if a beneficial owner cannot be ascertained by an organization?
If a legal entity has not been able to ascertain its beneficial owner, then it must, at the request of the relevant authority, provide proof that it has taken all measures to ascertain the beneficial owner details.
The following may be used as proof:
- Correspondence with the legal entity’s founders and shareholders;
- Requests to state authorities, including foreign state authorities, and answers to these requests;
- Information database printout;
- Other documents confirming that the legal entity has taken all measures to ascertain the details of its beneficial owner.
How can an organization collect information about its beneficial owner?
Legal entities are entitled to use all means available to obtain information:
- Enquiring from the legal entity’s shareholders by sending questionnaires;
- Reviewing the foundation documents of the legal entity and founders (shareholders);
- Interviewing founders (shareholders) and other persons and recording information in a questionnaire;
- Using legally available sources of information;
- Other ways at the discretion of the organization.
The law provides legal entities with the right to request any information necessary to ascertain beneficial owners from individuals and legal entities who are the founders or shareholders of a given legal entity or otherwise control it.
In turn, the persons from whom information is requested must provide it (Article 6.1(5) Federal Law No. 115-FZ). Since such process is not, in practice, a well-oiled machine, the legal entity that has duly requested information may refer to this provision of the law as an argument in its defense when provision of information is denied.
Article 6.1(5) also provides that the transfer to a legal entity of information necessary to ascertain its beneficial owners is not a violation of the law on personal data. So it is unlawful not to provide information referring to personal data law.
What is the liability for failure to provide information about beneficial owners?
Legal entities are brought to administrative liability if they:
1. Fail to fulfill the obligation to ascertain, update or keep information about their beneficial owners;
The following fines are imposed for such violation:
- For company executives – a fine from RUB 30,000 to RUB 40,000;
- For legal entities – a fine from RUB 100,000 to RUB 500,000.
2. Fail to provide, at the request of authorized bodies, information on the measures taken to ascertain the details of their beneficial owners.
The following fines are imposed for such violation:
- For company executives – from RUB 30,000 to RUB 50,000;
- For legal entities – a fine from RUB 300,000 to RUB 500,000.
We perform all the work necessary to ascertain, update, keep and submit information about beneficial owners. We do so in compliance with all the necessary confidentiality requirements and also assist with the documentation of such information and the organization of their storage. We offer the following services:
- We set up an internal register of beneficial owners;
- We draw up the structure of company owners;
- We draw up questionnaires and other forms to record the information about beneficial owners and ready for submission where they have been requested;
- We prepare the appropriate consent forms for personal data processing and other documents necessary to comply with personal data protection rules;
- We prepare certified copies of documents translated into Russian and duly executed for use in the Russian Federation.
For more information about this service, please feel free contact us.