Articles 59-61 AMLR

This article on the EU AMLR focuses on Chapter IV on beneficial ownership transparency. This section analyses Articles 59, 60 and 61, which address particular situations in which the identification of beneficial owners requires a more nuanced and tailored approach. A previous article examined the core provisions on beneficial ownership transparency, including definitions of beneficial owner, calculation of ownership interest and the concept of control. Readers seeking a systematic overview of the structure and operation of the framework are recommended to review that earlier article.

The rules on beneficial ownership form a central part of the AMLR’s preventive framework. By ensuring that the natural person or persons who ultimately enjoy the economic benefit of, or exercise control over, a legal entity or arrangement can be identified, the framework creates the conditions for an effective risk assessment and for preventing complex structures from being used to conceal the origin of assets or control.

For obliged entities, this means that the identification of beneficial owners cannot always be achieved through the immediate naming of natural persons. In some cases, categories of beneficiaries must be identified; in others, potential recipients of powers must be mapped; and in further cases, specific thresholds or control criteria apply. The legal analysis therefore becomes more complex and requires a detailed understanding of different structures. Against this background, Morling Consulting supports businesses across Europe with legal analysis of AML risks, reviewing complex ownership and beneficiary structures in order to ensure the correct identification of beneficial owners in accordance with the requirements of the AMLR.

Article 59 – Identification of a category of beneficiaries

Article 59 addresses situations in which beneficiaries have not yet been determined. The provision applies to legal entities similar to express trusts under Article 57 and, with the exception of discretionary trusts, to express trusts and similar legal arrangements under Article 58, as discussed earlier in this article series. Under Article 59(1), where the beneficiaries have not yet been identified, the category of beneficiaries and its general characteristics must be identified. The provision further states that, as soon as beneficiaries within that category have been identified or designated, they are to be treated as beneficial owners. This reflects the AMLR’s underlying principle of currency and ongoing updating of beneficial ownership information.

Article 59(2) sets out certain situations in which only the category of beneficiaries and its characteristics must be identified. These exceptions reflect a risk-based and proportionate regulatory approach. They apply in the following cases:

• Pension schemes governed by Directive (EU) 2016/2341.
• Employee financial ownership or participation schemes, provided that the Member State, following an appropriate risk assessment, has concluded that the risk of abuse for money laundering or terrorist financing is low.
• Legal entities similar to express trusts, express trusts and similar arrangements, provided that
  • the entity, trust or arrangement has been established on a non-profit basis or for charitable purposes, and
  • the Member State, following a risk assessment, concludes that the category presents a low risk of being used or abused for money laundering or terrorist financing.

Under Article 59(3), Member States must notify the Commission of the categories covered by paragraph 2 and provide reasons for their assessment. The reasoning must be based on the risk assessment carried out by the Member State. The Commission must in turn inform the other Member States. This provision ensures transparency even in relation to exceptions and limits the risk of divergences in national application.

Article 60 – Identification of beneficiaries in discretionary trusts

Article 60 concerns discretionary trusts. These trusts do not initially have fixed beneficiaries or categories of beneficiaries; instead, the trustees have the power to appoint beneficiaries from a group of persons. In these structures there is a risk of abuse, while the structure itself also makes it more difficult to determine the beneficial owners.

In relation to such discretionary trusts, where no beneficiaries have yet been selected, the objects of a power and the beneficiaries in default of appointment must be identified. Beneficiaries among the objects of a power are to be regarded as beneficial owners from the time they are selected. The objects of a power are the persons or categories of persons who may be considered for distribution. Beneficiaries in default of appointment are the persons who take effect if the trustees do not exercise their discretion. In addition, the beneficiaries in default of appointment are to be treated as beneficial owners if the trustees do not exercise their discretionary powers.

The second paragraph of Article 60 refers to Article 59(2) and provides that, where a discretionary trust meets the conditions set out there, only the category of objects of a power and the beneficiaries in default of appointment must be identified. In accordance with Article 59(3), those categories must be notified to the Commission.

Article 61 – Beneficial owners in collective investment undertakings

Article 61 contains a specific regime for collective investment undertakings. The provision operates as an exception to the first subparagraph of Article 51 and Article 58(1), meaning that the general rules on beneficial owners of legal entities and beneficial owners of express trusts do not apply in full. Under Article 61, the beneficial owners of collective investment undertakings are the natural persons who meet one or more of the following criteria:

• Persons who directly or indirectly hold at least 25 per cent of the units or shares in the undertaking.
• Persons who are able to determine or influence the investment policy.
• Persons who otherwise control the undertaking’s activities.

Risk-based and proportionate identification of beneficial owners

Articles 59–61 illustrate how the AMLR adapts the identification of beneficial owners to different business structures. What these provisions have in common is that they combine transparency with proportionality and risk-based assessment. No structure is exempt from scrutiny, but the method of identification is adapted to its legal and functional characteristics. In this way, the AMLR reinforces its overarching objective of ensuring that the natural person who ultimately exercises control can always be identified, even where this requires a more developed analysis.

For obliged entities, this creates requirements for documentation and the ongoing updating of beneficial ownership information. Morling Consulting’s lawyers advise businesses across Europe on complex ownership and beneficiary structures. Through in-depth legal analysis of AML risks, we support organisations in ensuring that their processes are aligned with the requirements of the AMLR.