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Register of ultimate beneficial owners (UBOs): slowly but surely

The UBO register in Lithuania is due to start functioning in 2019 and it is now time to make the necessary arrangements.

Following implementation of EU Directive No. 2017/1371, as of 1 January 2019 every legal entity established in Lithuania must “acquire, update and store” information about its UBOs and file it with the state register by 1 July 2019.

The information includes, for example, name and surname, date of birth, residential address, the state of issue of ID documents, the nature and extent of the beneficial interest.

Although the requirements  ̶ and the idea itself  ̶  come from the EU and in general are in the best interests of clarity and transparency, in terms of current national regulation they pose problems on several fronts.

First, obligations and liability for compliance are imposed on legal entities (i.e., management) without authorizing them to obtain the necessary information: in practice, management might even be incapable of doing so. This is especially problematic for past events and transactions, where often only the directly participating legal entity is known to the target company.

Additionally, there is no clear indication as to how a company required to report changes of UBOs should ascertain changes not happening directly in the company shareholder structure but in the ownership of a shareholder.

The second concern is about uncertainty as to what extent and to whom the register information should be available. Current regulation provides a fluid statement that information may be provided to someone having a “legal interest”. This formulation is open to interpretation and is causing general concern about personal data security. Changes in regulation of this area are still awaited.

To minimize risks, administrative costs and potential inconvenience related to these problems, legal entities should already be considering drafting/amending and implementing internal policies, SHAs or internal regulations to help cope with upcoming requirements.

 

Source: Law of 29 June 2017 amending the Law on Prevention of Money Laundering and Terrorist Financing of the Republic of Lithuania. No. XIII-568

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