Malta’s Financial Intelligence Analysis Unit (FIAU) has clarified the procedure for establishing the identity of the ultimate beneficial owner where the shares of a corporate customer are owned by a trust or foundation.
The guidance comes in a revised version of its implementing procedures, published on 18 October to incorporate recent legislative changes.
Some of the amendments are of particular relevance for persons dealing with structures that involve trusts or foundations or with trustees and administrators of foundations. In particular, the case where the shares of a corporate customer are held indirectly is dealt with in detail.
The amended guidance now clarifies that, in such a case, the recommended procedure is not to identify all the beneficiaries of the trust in line with the definition of ‘beneficial owner’ for trusts, which would also include the trustee and protector, because the customer is the body corporate and not the trust itself. Instead, the responsible person must first establish who the actual beneficiaries of the trust are, rather than its beneficial owners. The responsible person must then consider whether the relevant benefit is sufficient for the beneficiary to also be considered as a beneficial owner of the company, in other words that the beneficiary is ultimately entitled to 25 per cent or more of the shares or more than 25 per cent of the voting rights.
According to scholars within the field, this means that it is the indirect entitlement to the shares in the corporate customer that counts rather than any other beneficial interest, such as a discretionary benefit. If this does not amount to a sufficient interest, then the FIAU guidance states that the beneficial owners are those persons exercising control via other means. In the absence of any such person, the beneficial owners would be the management officials of the corporate customer, not the trustee company. It was also noted that, previously, the responsible person was able to choose whether to indicate the senior management of the corporate customer itself or the directors of the trustee company as the beneficial owners.
The amendments regarding corporate founders, protectors and trustees were primarily implemented to address comments in the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes’ second round peer-review report on Malta. They also deal with cases where customers are state-owned entities and with identification and verification of customers other than natural persons. Further, the amendments address keeping information up-to-date, placing an express obligation on regulated persons to ‘enquire from time to time whether the beneficial ownership information obtained at on-boarding is still current or otherwise.