Requirement to identify the ultimate beneficial owner (UOB)
Milo/ 31 Aug 2020
the administrator confirmed that:
- For a note issued by a securitisation vehicle and acquired by an investor, the CSSF has recently published a circular highlighting the requirement to identify the ultimate beneficial owner, so the paying agent very likely would not stop at nominee level and would need to identify the UBO behind the private bank;
- For an LP Interest in a GP-SLP structure, if the interest subscribed by a single nominee (a) is less than 25% of the total interests or (b) is more than 25% of the total interest but composed by multiple UBOS none of which owns more than 25% of the total interests, then the identification would stop an nominee level (the nominee would need to issue a representation letter to the administrator to the effect that no one owns more than 25% and that they have conducted AML checks on each of the UBOs). Otherwise the UBO will need to be identified as this is required by the RCS in Luxembourg, which keeps a register of UBOs (it is called the RBE).
and
Milo/ 1 Sep 2020
in attachment for your benefit the CSSF circular I was referring to yesterday.
Apparently banks in Luxembourg have been referring to it, in specific to the annexes on 'concealment of beneficial ownership', to determine that UBOs that are noteholders in securitisations also need to be identified.
and
Milo / 31 Aug 2020
the below is the view of our Luxembourg partner for securitisations as well as other Luxembourg based structures (Fundamentals/GH Services). As they know about the matter more than me for sure, I have to bow to their experience in the matter, which I know is extensive, albeit limited to issuances where Luxembourg-based banks acted as paying agents, custody of the issued shares is with banks such as BIL (so not the paying agent itself) or similar and securities are registered usually Euroclear or Clearstream.
I have also reached out to ISP for the sake of having a second opinion on his experience in the matter and Reto kindly confirmed to me that while currently they stop the identification process at nominee level, they are at present undergoing an internal project that may change in terms of the way the act in terms of UBO identification. Obviously ISP are Swiss and not Luxembourgish and they register the securities with SIX, so their processes may have been diverging in the past due to different local application of AML regulations as well as local regulatory decisions. As I said, things may change soon, according to Reto potentially within a month, and we may find ourselves in a similar situation than with the Luxembourg paying agents.
And in terms of funds and well as other corporate structures in general...what I can say personally is that across the board in the EU I am seeing more and more local company registries requiring for a UBO register to be maintained, so I am actually not surprised that the administrators of an SLP would require for those who acquire LP interests to identify them ultimately if they own individually more than 25%. Regulated funds are still a different beast, where as you correctly point out the market practice is still for their transfer agent (which differently from the administrator of an unregulated fund must be a regulated Fund Administrator, with licence in tow and direct supervision by a regulator) to be able to place MOSTLY reliance on the identification done by the nominees. But then again, these funds have typically hundreds of investors and the probability of having an investor owning more than 25% is tiny and I have seen some Fund Administrators asking for actual UBO identification when a big number of shares, representing a high percentage, was acquired. Of course in a GP-LP structure the investors are few and the chance to have a few or all above 25% is high and they are identified.