The New EU AML Legislation: What it means for the UBO identification and registration of Belgian Companies

On May 31, 2024, the European Union adopted new legislation aimed at preventing money laundering and terrorist financing, known as the EU AML Package. This package includes both a new AML Regulation (EU 2024/1642) and the 6th AML Directive (EU 2024/1640), representing a significant reform of Europe’s anti-money laundering framework in years.

This adopted package will change the rules for the identification and registration of UBOs, leading to adjustments in Belgium, with the new regulations set to take effect in 2027. 

Amendment of the ownership thresholds

Currently, the transparency requirements imposed by the member states vary significantly. This is due to different interpretations of the rules, leading to diverse methods for identifying the ultimate beneficial owners (UBOs) of legal entities. Indirect ownership is not calculated consistently, and there are differences between the legal systems of the member states. As these inconsistencies hinder transparency, the new AML regulation introduces an amendment to the threshold for identifying UBOs marking a significant shift in regulatory standards as we know today. This way a more consistent and robust framework for identifying UBOs across the internal market is made, thereby mitigating risks associated with financial crimes.

Under the new regulation, the current threshold of “more than 25%” is changed to “25% or more”. This means that any natural person holding (directly or indirectly) exactly 25% of shares, voting rights, or other ownership interests in a company will have to be classified as a UBO as from 10 July 2027. 

Furthermore, the new AML regulation allows member states to provide for even lower thresholds for specific high-risk sectors, where the potential for money laundering or terrorist financing is heightened. Member states can notify the European Commission of categories of companies that pose increased risks and for which a lower ownership threshold will apply. It could be set as low as 15%. This flexibility allows for a tailored approach to transparency measures, ensuring that entities operating in high-risk sectors are subject to enhanced scrutiny. 

Given that experience has shown that quite some shareholding structures were organized in such a way that certain individuals remained below the “more than 25%” threshold, companies will have to reassess their entire shareholding structure by 10 July 2027 to determine whether certain ‘new’ UBOs need to be identified and/or if certain companies will now have to register UBO category 1 & 2 instead of category 3 (i.e. members of the senior management). In addition, companies in sensitive sectors may face more frequent and detailed UBO filings, which may cover a broader group of individuals than previously.

Narrowing the UBO exemption 

The AML regulation will also significantly change the UBO exemption, as the criteria under which companies qualify for this exemption will be tightened. Currently, companies listed on regulated markets, both within the EU and on equivalent international exchanges, are exempt from the UBO registration requirements. This exemption also applies to companies that are 100%, directly or indirectly, owned by a listed entity. 

However, when the new regulation will enter into force in 2027, the exemption will be drastically restricted. From that point on, only companies whose securities are admitted to trading on a regulated market will qualify, provided that they meet the following strict conditions. Control over the company must be exercised exclusively by natural persons with voting rights, and no other legal entities or legal arrangements may be part of the company’s ownership or control structure. 

As a result, a lot of companies currently applying the UBO exemption because they are indirectly wholly controlled by a listed company will have to reassess their UBOs, as they will no longer be allowed to apply the UBO exemption.

Overview of measures to identify UBO

When a legal entity has exhausted all possible means to identify a UBO and is unable to identify any UBO, or when there is significant and justified uncertainty regarding the identified individuals, the AML regulation provides that the entity is required to maintain records of the measures taken to identify its UBOs.

In such cases, legal entities must provide a statement indicating either that there is no UBO or that the UBO could not be determined. This statement must include a justification explaining why it was not possible to identify the UBO and what factors contribute to the uncertainty regarding the information obtained. Additionally, the entity must provide details of all natural persons who hold senior management positions within the organization.

Currently, the Belgian UBO Frequently Asked Questions (the “UBO FAQ”) recommend that entities specify the reasons for selecting this category in the "Comments" field of the UBO register and upload any relevant supporting documents. As from 10 July 2027 this will become mandatory. 

Other worth mentioning changes

The introduction of the 6th Directive will bring changes regarding proof of registration of the UBO. Specifically, it establishes the possibility for member states to refuse or suspend the issuance of a valid certificate of proof of registration if inconsistencies or errors are identified during the verification process. If such discrepancies arise at the time of submission, the entity responsible for the central register can withhold the certificate until the issues are resolved. Furthermore, if verification occurs after submission and reveals that the information is no longer adequate, accurate, or up-to-date, the central register can suspend the validity of the certification until the necessary corrections are made. 

Secondly, the upcoming changes introduced by the 6th Directive regarding access to the UBO register, also aim to balance transparency and privacy. Following a ruling by the European Court of Justice, which restricted public access to UBO data on privacy grounds, the new Directive specifies who can access this sensitive information. In this context, access will be granted to public authorities, regulated entities such as banks and auditors, and persons who can demonstrate a legitimate interest, including investigative journalists, NGOs, and academics. This provision seems to offer a more detailed and broad interpretation of the persons deemed to have a legitimate interest, compared to what is currently outlined in Belgian legislation.

The AML Regulation will also change the obligation to report a change in the information of the UBO register within 28 calendar days. Currently, in Belgium it must be done within one month. 

Lastly, the retention of UBO information will be standardized to a five-year period (currently ten years under Belgian law), aligning it with anti-money laundering and counter-terrorism financing (AML/CFT) requirements. This change underscores the importance of maintaining accurate and up-to-date information on ultimate beneficial owners, which is essential for effective transparency. The central registers must also record the identity of the person responsible for maintaining this information. 

From the above, it is clear that quite some changes will take place in 2027, particularly regarding the identification and registration of the UBOs of legal entities. Since experience shows that identifying and registering UBOs is time consuming, it is advisable to start this process in good time. Should you have any questions regarding this, or should your company needs assistance with identifying its (new) UBOs in accordance with this new regulation, please do not hesitate to contact us.