The Czech Republic Government Amends Beneficial Ownership Law to Meet AML Obligations

The Czech Republic government revised Beneficial Ownership Law upon the European Commission’s assessment stating that the original version of the regulation does not comply with the 5AMLD.

The fifth Anti-Money Laundering Directive (5AMLD) mandates that each EU Member State gathers data of all individuals who have ultimate control over an organization and make that available in a public registry. So, the original legislation from the Czech Republic was wrongly transposed and lists a great number of businesses that don’t have a beneficial owner. While identifying the Ultimate Beneficial Owners (UBOs), only those individuals with the highest stake in the company—typically those owning more than a 40% share—were taken into account.

The latest amendment fixes this. Any shareholder who owns at least 25% of the company along with its organizational structures, should be classified and registered as a UBO. Additionally, it states that UBOs are entities that have more than 25% right to a portion of the institution’s profits and liquidation balance, or other equity funds.

“The register of beneficial owners will show no difference between an ultimate beneficiary and a person with ultimate influence”, voices law company Taylor Wessing. It would show whether they are a direct, indirect, or substituted beneficial owner and also how it’s determined. The ability of a Czech Republic corporation to rank top management as a substitute beneficial owner somewhere at top of its own model will remain unchanged if a beneficial owner couldn’t be proven through these definitions or when the corporate entity is governed by a government body that lacks a beneficial owner.

“Companies who are not compliant with the new regime face potential sanctions of up to EUR20,000”, reports law sector Schoenherr. Additionally, businesses with an invalid or unlicensed UBO are prohibited from distributing profits to either that UBO or another legal organization that has the same UBO.

“Every Czech Republic company should inspect its UBO records and, if necessary, update its UBO registration accordingly”, stated Schoenherr. The due date for this is April 1, 2023. “Particular caution should be exercised by those companies with multiple shareholders or those who have previously registered as their UBO a person as being the ultimate beneficiary”, the firm reports.

Suggested Read: Creating UBO Registry ‘Biggest Focus’ for US Treasury’s Anti-corruption Push