From time to time, a topic is tentatively raised in the public space, the subject of which is pursued globally, including in the country on the Vistula River.

From time to time, a topic is tentatively raised in the public space, the subject of which is pursued globally, including in the country on the Vistula River, and the sanctions associated with non-compliance can be disastrous.

What is it about? It is about the identification of the so-called beneficial owner, also often referred to as the ultimate beneficial owner(pol. Ostateczny beneficjent rzeczywisty). For the sake of simplicity, we will hereinafter use the abbreviation “UBO”.

As we mentioned in the introduction, this is a construct that is being introduced globally. The global AML guidelines are the responsibility of the FATF (Financial Action Task Force – pol. Grupa Specjalna ds. Przeciwdziałania Praniu Pieniędzy), which is an intergovernmental institution that aims to develop and define standards in the field of anti-money laundering, countering the financing of terrorism and other related threats to the international financial system and to promote their effective implementation.

Currently, the FATF consists of 39 member states and 37 member jurisdictions, as well as the European Commission and the Gulf Cooperation Council (which includes six countries: Saudi Arabia, Bahrain, Qatar, Kuwait, Oman and the United Arab Emirates).

The FATF has developed 40 Recommendations. These form one element of the international standards in the field of fighting money laundering, terrorist financing and proliferation, which countries should implement using legal, regulatory and operational measures tailored to their individual circumstances. The above recommendations are implemented across the EU on the basis of six anti-money laundering directives.

But why is this important to us?

It is important because the FATF sets out the main framework which contain the aforementioned EU directives on this topic operate, in particular the Sixth Anti-Money Laundering Directive (OJ 2018 L. No. 284, p. 22), within which, in turn, the Polish AML and Terrorist Financing Act of 1 March 2018 (Dz. U. 2023, item 1124, hereinafter also referred to by us as the “AML Act”) operates.

On the basis of the above-mentioned documents, a huge number of entities operating on the Polish market are obliged to carry out an analysis to determine their UBO and make a notification to the Central Register of Beneficial Owners (pol. CRBR).

Who is obliged?

With such a long introduction, we have come to what should be of interest to everyone – the answer to the question “does this also apply to me?”.

In Poland, commercial law companies, with the exception of public companies within the meaning of the Act of 29 July 2005 on Public Offering, Conditions Governing the Introduction of Financial Instruments to Organised Trading, and Public Companies (Journal of Laws 2022, item 2554), European companies, cooperatives, European cooperatives, associations subject to entry in the National Court Register (pol. KRS), and foundations, among others, are obliged to report information on real beneficiaries and their updates. Failure to comply with this obligation could cost us up to 1 million zlotys 😉.

All of the above entities should therefore ask themselves:
“Who should I report?”

Only UBOs are subject to notification. For the sake of simplicity, however, we will mainly focus on Polish commercial law companies that operate over-the-counter (OTC).

As this entry is only an introduction to our short series, we present below the simplest version of the understanding of the obligation in question.

  1. As an introductory discussion of the issue, we should start with the Polish definition of an UBO (Article 2(2)(1) of the AML Act), where an UBO is understood as:
    – any natural person exercising
    – directly or indirectly control over a client
    through the possession of powers, which arise from legal or factual circumstances, enabling the
    exercising decisive influence over actions or activities undertaken by the client, or any natural person on whose behalf a business relationship is entered into or an occasional transaction is carried out, including in the case of a legal person other than a company whose securities are admitted to trading on a regulated market subject to disclosure requirements under European Union law or equivalent third-country law (and we have further provided an illustrative catalogue of UBOs):
    1. a natural person who is a shareholder holding more than 25% of the total number of shares in that legal person,
    2. a natural person holding more than 25% of the total voting rights in a decision-making body of that legal person, including as a pledgee or usufructuary or under agreements with other persons entitled to vote,
    3. a natural person controlling a legal person or legal persons who together hold more than 25% of the total shares, or who together hold more than 25% of the total voting rights, in a determining body of that legal person, including as a pledgee or usufructuary or under agreements with other persons entitled to vote,
    4. a natural person exercising control over a legal person through possession of powers referred to in Article 3(1)(37) of the Accounting Act of 29 September 1994 (Journal of Laws of 2023, item 120 and 295), or
    5. a natural person holding a senior management position in the event of a documented impossibility to establish or doubts as of the natural persons identity referred to in the first-fourth indent and where no suspicion of money laundering or terrorist financing is established.

Simple, right? A too shallow approach to the above definition, however, may lead us to assume a simplification that the UBO is only the one who owns more than 25% of the shares in the notifying entity, and if such persons are not found, the entity will be guided by the control premise as a substitute and report persons holding the so-called senior management position (e.g. members of the management board). It should be remembered that the control condition is as important as the so-called shareholding condition – the structure and control tests are performed simultaneously.

So, the sample facts are as follows – a family limited liability company A Ltd (pol sp. z o.o.), having two partners (Ms Anna and Mr Marek) – father and mother – (50% of shares each), whose sole member of the management board is their son (Mr Radosław), holds 100% of shares in its daughter company B Ltd (pol. sp. z o.o.), whose only member of the management board is a third person, tied to the company with a managerial contract. The strategic business decisions of B Ltd (sp. z o.o.) are taken by the management of A Ltd (pol. sp. z o.o.).

Who should B Ltd. report as an UBO?

According to the above entries:

Ms Anna and Mr Marek (each entered separately) – because they indirectly control B Ltd (pol. sp. z o.o.) by, among other things, owning more than 25% of the shares;

Mr Radoslaw – indirectly exercises control over B Ltd (pol. sp. z o.o.) in his capacity as a senior manager of A Ltd (pol. sp. z o.o.) which indicates in this case the actual exercise of influence over the activities of B Ltd (pol. sp. z o.o.)

As the example also shows, often the ‘de facto’ ability to influence the filing entity is often not due to the shareholding structure itself, but to the corporate, let us call it for simplicity, intra-group relations.

In the next posts, we will give you a closer look at how to recognise the UBO using examples based on Polish and EU legislation.

Stay tuned!