Anti-Money Laundering Rules Imposed New Obligations on Entities Registered in the Finnish Trade Register
28 January 2019
Authors: Sanna Boow, Senni Mäki-Hallilla, Miikka Hiltunen and Elli Sistonen
Certain entities registered in the Finnish Trade Register (Fin. kaupparekisteri) are obliged to identify and maintain records of their beneficial owners from 1 January 2019 onwards. The majority of these entities must also register their beneficial ownership information in the Trade Register by 1 July 2020. Hannes Snellman has prepared a brief guideline on the new obligations from the perspective of limited liability companies.
The guidelines below use companies as an example, although the new obligations also have an effect on other types of entities, such as foundations (Fin. säätiö) and cooperatives (Fin. osuuskunta). The requirements vary depending on the type of entity in question.
Why Have the New Obligations Been Introduced?
The new obligations are based on the 4th Anti-Money Laundering Directive ((EU) 2015/849), which has been implemented in Finland mainly by the Finnish Anti-Money Laundering Act (444/2017) (the “AML Act”) and, with regard to the registering of beneficial ownership information, the Act on the Finnish Trade Register (129/1979).
Based on the directive, the objective of the new obligations is to improve the tracking down of criminals who might hide their identity behind a corporate structure.
Who Is a Beneficial Owner?
Each company must identify its beneficial owners.
“Beneficial owner” means any natural person who ultimately owns or controls a company. A person is a beneficial owner if they have:
1. direct ownership of more than 25% of the shares or voting rights in the company;
2. indirect ownership of more than 25% of the shares or voting rights in the company; or
3. actual control over the management of the company by other means (e.g. through a shareholder agreement).
Indirect ownership or the use of voting rights refers to a situation where a person controls a company through another entity.
Where a company does not have any beneficial owners as defined above, the Board of Directors, the CEO, or similar senior management officials are deemed as the beneficial owners of the company. In this case, the company must itself define which management officials are the company’s beneficial owners.
The beneficial owners of a housing company (Fin. asunto-osakeyhtiö) and a mutual real estate company (Fin. keskinäinen kiinteistöosakeyhtiö) are the registered members of the company’s Board of Directors.
In summary, each company has at least one beneficial owner, with the exception of listed companies (see below).
Listed Companies Are Excluded from the New Obligations
Companies whose shares are listed on a regulated market (e.g. the Nasdaq Helsinki stock exchange) do not have to identify, keep records of, or register their beneficial ownership information. This is due to the fact that public disclosure requirements on shareholders’ holdings in listed companies are already governed by securities markets legislation.
Who Must Keep Records on Beneficial Ownership Information and How?
Companies themselves are responsible for identifying their beneficial owners.
The Board of Directors of a company is responsible for keeping up-to-date and accurate records on the beneficial ownership information of the company as of 1 January 2019. The beneficial ownership records must be kept in a reliable manner.
What Beneficial Ownership Information Must Be Included in the Beneficial Ownership Records?
The beneficial ownership records of a company must include the following information on each beneficial owner of the company:
• Date of birth
• Country of residence
• Basis for control or ownership (e.g. ownership of shares)
• Proportion of control or ownership (e.g. percentage of ownership of shares)
What Beneficial Ownership Information Must Be Registered in the Finnish Trade Register?
The notification to the Finnish Trade Register must include the information listed in the previous paragraph regarding each beneficial owner of the company.
When Does the Beneficial Ownership Information Have to Be Registered?
In the case of existing companies, the beneficial ownership information must be registered by 1 July 2020. The Trade Register begins to accept beneficial ownership notifications as of 1 July 2019.
In the case of new companies that are being established, the notification of incorporation (Fin. perustamisilmoitus) must include the beneficial ownership information as of 1 July 2019.
Any changes to the beneficial ownership information must be notified to the Trade Register without undue delay.
Who Has a Right to Obtain the Beneficial Ownership Information of a Company?
Companies must provide their beneficial ownership information on request to reporting entities, such as banks and other financial service providers (as defined in the AML Act), who use such information for anti-money laundering or counter-terrorist financing purposes.
Reporting entities also have the right to receive beneficial ownership information for the purpose of carrying out their customer due diligence procedures.
The Finnish Patent and Registration Office (Fin. Patentti- ja rekisterihallitus), which holds the Trade Register, provides beneficial ownership information to reporting entities.
What Are the Sanctions for Non-Compliance with the New Obligations?
Sanctions are in place both for neglecting the registration of beneficial ownership information and for notifying false beneficial ownership information. Potential sanctions include:
• Fine for a failure to file business information with the Trade Register within the meaning of the Finnish Business Information Act (244/2001).
• Fine or imprisonment for up to three years for a registration offence within the meaning of the Finnish Criminal Code (1889/39).
Hannes Snellman Assists with Corporate Law and Anti-Money Laundering Matters
The corporate and financial services regulation teams at Hannes Snellman are happy to assist with any questions relating to general corporate law matters and anti-money laundering.