Explanation of beneficial owners
A foundation, including a fund, in accordance with Section 2, Paragraph two of the Law on Associations and Foundations, is a set of property, which is separate for the achievement of the objective specified by the founder, which does not have a profit-making nature. According to Section 86 of the Law on Associations and Foundations, a foundation has a founder, as well as a pool of beneficiaries may be determined for a foundation in accordance with Section 91.
In accordance with Section 1(8) of the Law on the Prevention of Money Laundering and Terrorism Financing (hereinafter - Law), a legal arrangement is an association of persons who have independent legal capacity, as well as a arrangement which is not a legal person, but has independent legal capacity and the structure of which may include the founder, the authorised supervisor, (manager) or equivalent status, and the beneficiary, if a natural person who benefits has not yet been determined, a person in the interest of which a legal arrangement has been established or operates, any other natural person who actually exercises control over a legal arrangement by means of ownership or other means.
In defining the definition of the true beneficiary in Article 1(5) of the Law, it was established in accordance with Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on preventing the use of the financial system for money laundering or terrorist financing and amending Regulation (EU) No 684/of the European Parliament and of the Council 2012 and repealing Directive 2005/60/EC of the European Parliament and of the Council and Article 3(6) of Commission Directive 2006/70/EC. According to point (c) of that provision, 'beneficial owner' means any natural person (s) actually owned by or under the control of the client and/or natural person (s) on whose behalf the transaction or activity is carried out and at least in relation to legal entities for entities such as funds and legal arrangements similar to trusts, the natural person (s) holding a post (s) equivalent to or similar to those referred to in point (b). Point (b) of that provision refers to positions such as the founder; the authorised person (s); the supervisor (if any); the beneficiaries, or, in the absence of a natural person benefiting from a legal arrangement or legal entity, a group of persons in the interest of which a legal arrangement or legal entity has been established or operated, as well as any other natural entity, a person who actually exercises control over a trust through direct or indirect ownership or other means.
In the light of the above, it is concluded that the definition of legal arrangements used in the Law applies to foundations and therefore Article 5 (b) of the Law applies to the clarification of the true beneficiary in the foundation.
The law does not contain a specific framework for the obligations specified, depending on the nature, nature or purpose of the legal person's activities. It should also be noted that the legal person is a legal fiction, followed in each case by natural persons who organise, manage or control it, so that there is no situation where the true beneficiary is not — it may not be possible to clarify it according to the definition set out in the Law. Consequently, there cannot be a situation and the Law does not provide for the registration of information in the registers carried by the Enterprise Register regarding the fact that a legal person does not have a genuine benefit.
In accordance with Article 1(5)(b) of the Law, the true beneficiary is a natural person, the owner of a legal person or who controls the client of the subject of the Law, or in the name, for the benefit, of which a transaction relationship is established or an occasional transaction is carried out, and it is at least in the case of legal arrangements, the natural person who owns or in the interests of whom a legal arrangement has been established or is in operation or is exercising, directly or indirectly, control over it, including which is the founder, trustee or supervisor (manager) of such a arrangement.
In the guidelines 'Transparency and true beneficiaries' issued by the Financial Transaction Task Force (FATF) in October 2014, the true beneficiaries are interpreted as the natural person who 'ultimately' owns or controls the 'client' and/or the natural person for whom the transaction is being carried out. It also includes those persons exercising final control over the legal person. 'Ultimately owned or controlled' and 'exercising final control' refers to situations where ownership/control is exercised through ownership or other means of control other than direct control. A fundamental feature of the definition of the beneficiary is that it goes beyond legal ownership and control. The definition of FATF focuses on a natural person who actually owns a legal person, who exercises the powers of senior management of a legal person or the assets of a legal person, as well as a natural person exercising effective control over the legal person (whether or not the person holds an official position in the legal person).
In the case of direct participation or control, the true beneficiary shall be directly controlled by the legal person and may result from the exercise of ownership (e.g. founder of the foundation) or lawful control (e.g. board member). However, in the case of indirect participation or control, the control shall be exercised through another person, whether natural or legal. Indirect control may be carried out by a variety of means, such as a mutually concluded contract or by means of a dominant influence (for example, the dominant influence of a board member in a foundation, financing a foundation through creative links or contractual obligations, and members of the administrative bodies of the foundation may cooperate with each other to increase such indirect control through another person by closing official or informal informal contracts, as well as by exercising their powers to appoint senior management to the foundation).
In the light of the above, true beneficiaries of the foundation, in accordance with the assessment made in a particular factual situation, concluding which natural person or several natural persons actually control the foundation in accordance with Section 1(5)(b) of the Law, could be both the founder of the foundation and the member of the board or the beneficiary of the foundation. It should be noted that there is an individual situation in each legal person and there may also be situations in which the true beneficiary cannot be identified in the foundation.
At the same time, it should be noted that in cases where the true beneficiary of a legal person cannot be identified, in accordance with Section 18, Paragraph seven of the Law, the entities specified in Article 3 of the Law (e.g. credit institutions, outsourcing accountants, sworn notars, etc.) may consider as the true beneficiary of the legal person the person who holds senior management in that legal person. the office of the institution. Accordingly, in cases where information is recorded in the Enterprise Register that it is not possible to identify the true beneficiary, in accordance with the Law, in order to allow entities identified in Article 3 of the Law to carry out customer research activities, the legal person, as the true beneficiary, will have to indicate one, several or all members of the Management Board when completing customer survey questionnaires, taking into account: an assessment of the subject of the Law on the essential circumstances.
Identification of true beneficiaries
As in other legal persons, the foundation complies with the Law 18. The arrangements laid down in Article 1 shall, where it has grounds to believe that it has become the true beneficiary of the foundation, have an obligation to notify the foundation concerned of that fact. The Board of Governors of the Foundation shall be obliged, on a reasonable basis, to ascertain whether it is not the true beneficiaries, as well as to whether the (cleared) information received on the true beneficiaries is true.
Under 18 of the Law. The fourth paragraph of Article 1 and 18. The first paragraph of Article 2 shall be submitted by the legal person without delay, but not later than within 14 days from the date of the relevant information, to the Enterprise Register an application for the registration of information on the true beneficiaries.
According to the Law 18. In submitting an application for registration (establishment) of a foundation to the Enterprise Register, as well as by applying for changes in the composition of the management body (board), the application shall indicate information regarding its true beneficiaries in accordance with the Law 18. The requirements of Article 2.
In the light of the above:
- In the case of registration of a new foundation, the application for registration must also include information on the true beneficiaries;
- The foundation shall, without delay, but not later than within 14 days from the date of the information on the true beneficiaries or the date of receipt of the change in the relevant information, submit an application to the Enterprise Register for the registration of information on the true beneficiaries or for the registration of any changes made to that information;
- When applying for a change in the composition of the management body (board), it shall also be mandatory to provide information on the true beneficiaries or to certify that the recorded information has not changed.
Information to be submitted
The information to be stored in the legal person regarding the true beneficiaries is specified in the Law 18. In the fourth paragraph of Article 1. According to the Law 18. Section 2, first paragraph, Law 18. The information specified in the fourth paragraph of Article 1 shall also be submitted to the Enterprise Register, except for the documentary justification of the control carried out, as well as information regarding the date of birth, month and year of the person holding the Latvian personal identity number, the number of the identification document and the date of issue, the State and the institution which issued the document.
It shall be indicated that in accordance with the Law 18. The information provided for in the fourth paragraph of Article 1 concerning THE FAO, including the documentary justification for the control carried out, must also be kept by the legal person himself.
Upon request of the Enterprise Register of the Republic of Latvia, in order to enable it to ascertain the reliability of the information submitted, the foundation shall submit:
- the documentary justification for the control carried out;
- a document confirming the relevance of THE information identified BY THE PLG:
- a notarised copy of the identity document;
- a statement of the foreign population register;
- other documents equivalent to those documents;
- a document supporting proof that IT is not possible to clarify THE PLG.
In the light of the above, the following information shall be recorded regarding the true beneficiaries of the foundation in the registers carried by the Enterprise Register:
- the personal identity number (if any - date of birth, month, year, number and date of issue of the identity document, country and authority which issued the document);
- the country of residence;
- way of exercising control over the legal person:
- through the status of the legal person:
- as founder of the foundation;
- as a representative of the executive or administrative body;
- as a separate person controlling (if the true beneficiary controls the representatives of the founder, executive body or administrative body indirectly):
- on the basis of a contract of authorisation;
- on the basis of ownership;
- on the basis of the transaction relationship;
- another (free text field with the option of entering an undefined type);
- through the status of the legal person:
- information on the person through whom the control is carried out (indicated if any of the methods referred to in points 6.2 or 6.3 in which the control is carried out):
- the name, surname, personal identity number of the natural person (if the person does not have a personal identity number - date of birth, month and year);
- the name, registration number and legal address of the legal person (may also be a foreign legal person).
Under 18 of the Law. The second sentence of the second paragraph of Article 2 - if the foundation has used all possible means of clarification and has concluded that it is impossible to identify any natural person, THE PLG, as well as the doubts that it has THE PLG, it must be confirmed in the application, with a minimum indication of the grounds. In such a case, it will be registered in the relevant register that IT is not possible to clarify THE PLG.