Foreward by Andrew Chilvers
When the 5th Anti-Money Laundering Directive was introduced into law by the UK and EU in January 2020, for many professionals it was a much needed addition to legislation that would significantly help business transparency and combat money laundering. In essence, it was good for business and for public and professional confidence.
All jurisdictions signing up to the 5th Directive will build and maintain UBO registries that will be publicly available at any time. UBO registries will also be set up for bank accounts and trusts, although these latter two will not be publicly available but be accessed by the relevant authority such as financial intelligence units and legal advisors looking into money laundering. Investigative journalists who can show a legitimate interest in the case can also have access, which is vital if another Panama Papers (see below) is to be uncovered. Across the UK and EU national UBO registers will be set to connect through a central European platform by April 2021.
Please provide a brief overview of the UBO Register in your jurisdiction and its history?
Please refer to table below.
How can your firm ensure your clients are fully compliant with the new / existing requirements?
While for over two years all foreign entities have been required to enrol or update their records with the CNPJ for UBO identification purposes, many companies holding assets, rights, and equity stakes are delinquent or unaware of this requirement. Also, enrolment is made in different agencies according to the nature of activities in Brazil. For example: (i) portfolio investment vehicles should enrol with the CNPJ upon request to the Brazilian Securities and Exchanges Commission (“Comissão de Valores Mobiliários” or “CVM”); (ii) foreign direct investment or lending vehicles must require their enrolment directly to the Brazilian Central Bank (“Banco Central do Brasil” or “Bacen”); (iii) entities holding intellectual property rights like patents and trademarks are registration exempt; and (iv) specific situations are handled directly by the Brazilian Internal Revenue Service (“Secretaria Especial da Receita Federal do Brasil” or “RFB”). Brazil is well known by its bureaucracy and red taping, so a local advisor would be paramount to steer international business transactions.
What changes can we expect to see emerging, are any new proposals expected?
Brazil is currently compliant with the best international standards for UBO identification and is in line with global initiatives to combat money laundering and tax avoidance. It has adhered to policies such as the Financial Action Taskforce (FATF) and the European Anti-Money Laundering Directives. While no changes to the current reporting obligation are envisioned, a higher standard of scrutiny is expected from RFB as the compliance authority.
What other information might be relevant?
Definition of “ultimate beneficial ownership”
Under Normative Ruling RFB No. 1,863/18, a UBO is considered an individual: (i) who directly or indirectly holds, controls or influences in a significant manner a legal entity; or (ii) on behalf of whom a transaction is conducted. Significant influence is considered to be exerted whenever an individual: (i) directly or indirectly holds over 25% of the entity’s capital stock; or (ii) directly or indirectly has the power to direct corporate resolutions or appoint a majority of the entity’s officers.
Exceptions to UBO disclosure
The same regulation also excludes some entities to have their UBOs disclosed, namely: (i) public companies or collective investment vehicles listed in exchanges or OTC markets in countries where public disclosure of relevant shareholders is mandatory, except for entities domiciled in tax havens or jurisdictions subject to privileged tax regimes (as defined in Sections 24 and 24-A of Federal Law No. 9,430/96); and (ii) Charities, NGOs, and other non-profit entities, except for those engaged in provision of trustee services or domiciled in tax havens.
Administrative penalties
Failure to provide information related to final beneficiaries or to submit documents to evidence final beneficiaries shall prevent the foreign entities to give effect to banking transactions, handling accounts, making financial investments, borrowing funds, and distribute dividends.