Introduction

On 20 May 2015, the European Council issued Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing (the “4th AML Directive”). Article 30 of the 4th AML Directive required EU Member States, including Cyprus, to ensure that corporate and other legal entities incorporated within their territory are required to obtain and hold adequate, accurate, and current information on their beneficial ownership. Furthermore, Member States were required to keep a central register of the beneficial owners of firms within their respective jurisdictions.

The 5th AML Directive and Public Access

On 30 May 2018, the European Council issued Directive (EU) 2018/843, amending Directive (EU) 2015/849 (the “5th AML Directive”). Under the revised provisions, EU Member States were required to ensure that information on beneficial ownership is accessible to any member of the general public, thereby establishing publicly accessible registers of beneficial ownership.

The 5th Anti-Money Laundering EU Directive was transposed into Cyprus Legislation through the Prevention and Suppression of Money Laundering Activities Laws of 2007-2021 (the “AML Law”) on 23 February 2021. The AML Law was further amended during 2022 and 2023.

Obligations under the AML Law

According to Section 61A of the AML Law, companies and other legal entities incorporated in the Republic of Cyprus must obtain and hold adequate, accurate and current information on their beneficial ownership, including details of the beneficial interests held.

The AML Law provides for the establishment of a central beneficial owners register for companies or other legal entities. Likewise, beneficial owners, including through shares, voting rights, ownership interest, bearer shareholdings or control via other means, shall provide the companies with all the information necessary to comply with their obligation.

1. Central Register of Beneficial Owners

The information is held in a central register, which contains details about the beneficial owners of companies or other legal entities. This register is drawn up, maintained and published by the Registrar of Companies and Official Receiver of Cyprus and is in electronic form. Public access to this register commenced on 1 June 2022.

2. Responsibilities of Companies and Legal Entities

In accordance with Section 4 of the Directive 112/2021Companies and other legal entities, along with their officers, must take all reasonable measures to obtain and hold at their registered office, adequate, accurate, and current information on their beneficial ownership. This information must be filed, kept, stored, and updated at the registered office of the entity.

Guide as to the obligation of submission

1. Who is considered a beneficial owner?

According to Article 2 of the AML Law, a "beneficial owner" is the natural person who ultimately owns or controls the legal entity.

In the case of a trust, the beneficial owner includes:

1. the settlor;
2. the trustee(s);
3. the protector, if any;
4. the beneficiaries, or if undefined, the class of persons in whose main interest the legal arrangement or entity is set up or operates;
5. any other natural person exercising ultimate control over the trust by means of direct or indirect ownership or by other means;

Ownership or control may be exercised directly or indirectly, through:

• the holding of a sufficient percentage of shares;
• voting rights;
• significant influence or control by other means.

If no natural person is identified as the beneficial owner, or if there is doubt, the details of the senior management official must be submitted also indicating whether the person is a director or whether it holds another position.

2. When is a Person Deemed to Have ‘Ownership’?

A person is deemed to have ownership if they have:

• Direct shareholding of 25% plus 1 share or an ownership interest of more than 25% in the issued capital of the company, held directly
• A shareholding of 25% plus one share or an ownership interest of more than 25% in the issued capital of the company, held indirectly through a legal entity

3. Which Entities Have the Obligation to Submit Details?

According to Directive 112/2021 issued by the Registrar of Companies, every legal entity and its officers must submit the details of its beneficial owners to the register. These entities include:

• Cyprus Companies incorporated or registered under the Companies Law Cap.113
• European companies (SE)
• Partnerships governed by the General and Limited Partnership and Business Names Law, Cap. 116
• Investment funds such as UCITS, AIF, AIFLNP, and RAIF

4. Exemptions from Submission

Certain entities are exempt from the obligation to submit beneficial owner details, including:

• Overseas companies
• Trade names
• Legal entities listed on a regulated market subject to disclosure requirements under EU law
• Entities subject to equivalent international standards ensuring adequate transparency of ownership information
• Entities that applied to be struck off or entered into liquidation before 12/03/2021 noting that all entities whose strike off or liquidation was initiated after the cut-off date of 12/03/2021 are obliged to submit the details of their beneficial owner.

5. Required Information for Submission

The information to be filed for each natural person beneficial owner includes:

• Name, surname, date of birth, nationality, and address of residence
• Nature and extent of the beneficial interest held directly or indirectly, including through shares, voting rights, or significant influence/control
• Identification document number indicating the type of document and the country of issuance
• Date of changes in the particulars or when the person ceased to be a beneficial owner

Reporting Obligations and Deadlines

1. Annual obligation

An annual reporting obligation has been implemented as of 1 April 2024.

Between 1st October and 31st December of each calendar year, every legal entity which is under an obligation to disclose its beneficial ownership information in the register will need to re-confirm the accuracy of the information previously disclosed.

2. Updates to the Register

The register must be updated:

• within 45 days of the day on which the change of beneficial owners and/or the details thereof came to the knowledge of the legal entity or its officers
• within 90 days of the establishment of a new entity

3. Imposition of fines

Fines and penalties may be imposed to entities and their officers that do not comply with the Registrar’s Directives and the provisions of the AML Law regarding the disclosure of beneficial owner information. As of 1 April 2024, the entity and each of its officers shall be liable to a penalty of:

• two hundred Euros (€ 200) and
• a further fine of one hundred Euros (€100) for each day of continuation of the violation with a maximum total fine of twenty thousand Euros (€ 20,000)

Officers are not subject to fines if they exercised due diligence and the violation was not due to their negligence.

Notably, the Registrar of Companies, in a recent announcement which may be accessed here, urged all legal entities to immediately take the necessary steps to inform the register of beneficial owners, and reaffirmed that any failure/delay in informing it will result in financial penalties as provided for in the Directive 112/2021.

Several recourses have been filed against the decision of the Registrar of Companies to impose fines for failure to comply with the aforementioned obligations. The recourses are currently pending before the Administrative Court.

Access to the Register of Beneficial Owners

Although as mentioned above, the 5th AML Directive required Member States to launch and keep publicly accessible beneficial owner registers, following the Court of Justice of the European Union (CJEU) decision in joined cases C-37/20 and >strong>C-601/20, of 22 November 2022, access to the Cyprus BO register for the general public is suspended as of 23 of November 2022 pursuant to an official announcement of the Department of Registrar of Companies and Intellectual Property which can be accessed here.

According to the above-mentioned CJEU decision, Article 1, point 15(c) of the 5th AML Directive which provides for access to the information on the beneficial ownership of legal entities to any member of the general public, is invalid as it constitutes a serious interference with the fundamental rights of respect for private life and to the protection of personal data, enshrined in Articles 7 and 8 respectively, of the Charter of Fundamental Rights of the European Union.

Access is now granted to the following authorities:

1. Competent Supervisory Authorities, the FIU, the Customs Department, the Tax Department, the Police, the Treasury of the Republic of Cyprus, Audit Office of the Republic of Cyprus, the Internal Audit Service, Directorate General Growth of Ministry of Finance, the European Commission, the European Court of Auditors, the European Anti-Fraud Office and the European Public Prosecutor’s Office (EPPO) which have unlimited and unrestricted access without the payment of a fee or notifying the Entity;
2. Obliged entities (such as, among others, banking institutions and auditors), only in the context of conducting due diligence and identification measures for the client (KYC) have access to the name, month and year of birth, nationality and country of residence of the beneficial owner as well as to the nature and extent of the beneficial interest held, following payment of a specified fee per Entity and the approval of the e-request by the Registrar of Companies officers.

Guidance as to the submission of details

In February 2024, the Registrar of Companies published a 68-page “Guidance to the Final Solution of the Beneficial Ownership Register” which can be accessed here.

The Registrar of Companies has also indicated that for any questions/technical difficulties you can contact Ubos@meci.gov.cy.

Conclusion

This guide provides an overview of the establishment and obligations related to the register of beneficial owners in Cyprus. Compliance with these requirements is crucial to avoid penalties and ensure transparency in the ownership of legal entities. For further details or technical assistance, entities can contact Ubos@meci.gov.cy.

Our firm specializes in ensuring your compliance with beneficial ownership regulations and can provide comprehensive support, including filing a recourse. Our legal team can guide you through the recourse process, helping to mitigate fines and resolve any issues with the Registrar of Companies, ensuring your business remains compliant and protected.