AMLR and Beneficial Ownership
AMLR will apply in the EU from July 10th 2027.
The regulation is quite specific regarding how the identification of beneficial owners must be conducted. You can find our initial thoughts on the new legislation in this blog article from 2024.
For Norway, which is an EEA member, the exact date the AMLR will come into force is still unconfirmed. However, a working group appointed by the Ministry of Finance has proposed that the AMLR articles regarding beneficial owner identification be adopted into Norwegian law early. This would align Norway’s implementation timeline with that of the EU.
July 2027 is approaching quickly, and obliged entities are working hard to prepare. At T-rank, we have already expanded our beneficial ownership toolbox to support these new rules as comprehensively as possible.
What this means for you:
Early Adoption: Customers who wish to align their identification processes with the new rules today can already do so.
Impact Analysis: We can “test run” your portfolio to determine exactly how the new regulations will affect your current data and processes.
Implementing AMLR rules for the identification of Beneficial Owners
The rules for identifying beneficial owners are primarily found in Articles 52–61.
Article 52: Beneficial ownership through ownership interest
Article 52 clearly states that integrated ownership should be used when identifying beneficial ownership based on ownership interest. T-rank has always supported integrated ownership, which is perhaps the primary reason why most of the world’s larger banks use T-rank.
The article refers to “shares or voting rights,” implying that an integrated approach should also be applied when analyzing voting rights in an ownership structure. As discussed many times, in T-rank’s opinion, applying an integrated ownership approach to voting rights does not make much sense. An example illustrating this is example 4 in this white paper. However, in order to satisfy the exact wording in the article, we have introduced a new model in our toolbox: Integrated Voting Rights. Note that for datasets in which we do not have a distinction between ownership and voting rights, it makes no sense to introduce this new model.
Article 53: Beneficial ownership through control
Article 53 defines control in a stricter, more traditional way than we are used to in connection with beneficial ownership. When we look at ownership (i.e., voting rights), “50% plus one of the shares or voting rights” is explicitly stated.
T-rank has two different approaches in our toolbox that can be applied to satisfy Article 53: Ownership at Each Level (with a threshold of >50%) and Voting Power (with a threshold close to 100%). The first aligns exactly with the wording in Article 53, while the second will also capture cases of de facto control. For convinience, we have introduced an own model called control that utilizes Voting Power for determining control (default threshold=99.9%), even though the Voting Power model with the same high threshold would have given the same beneficial owners.
Article 54: Coexistence of ownership interest and control in the ownership structure
This criterion is partly old and partly new. The minimum criterion for beneficial ownership in AMLD4 was a person who directly and/or indirectly controls more than 25% of the voting rights. Half of Article 54 is similar to this, except the threshold is at least 25%, and the beneficial owner could control either ownership or voting rights.
We have renamed our old model, Control of Voting Rights, to Control of Ownership and updated it to include both the share of capital and the share of voting rights. API consumers may choose which of the two should be active and can set thresholds independently. As before, for datasets with NA values, the caller might choose to treat NA values as the maximum available share. Additionally, this model now supports family relations for datasets and clients where this is applicable.
Article 54 introduces a new way of combining ownership and control: a subsidiary of a company in which a person is a beneficial owner according to Article 52 will also have that person as a beneficial owner. This seems like a slightly strange criterion, as a person who becomes a beneficial owner according to this might not have any actual influence in the company and only a marginal economic interest.
To satisfy this criterion, we have introduced a new model in our toolbox: Ownership in Mother. This model must be combined with at least one of the models Integrated Ownership or Integrated Voting Rights, as those models define the ownership part of the criterion.
Article 55: Ownership structures involving legal arrangements or similar legal entities
Article 55 states that if a legal arrangement(s) has sufficient ownership or control of a customer in a way that would have made the arrangement(s) a beneficial owner if it were a natural person, the beneficial owners of the arrangement(s) become beneficial owners of the customer.
This is the way T-rank has treated these kinds of entities for years, and thus this criterion introduces no changes.
Article 57-61: Beneficial owners in various kinds of trusts and other similar arrangements and financial undertakings
In general, T-rank does not have the data available to fulfill all the details of these articles. In datasets where we have contact data (board of directors, senior management), we will return the persons having specified roles as beneficial owners for foundations and trusts. The role model can also be turned on manually by the caller for any type of entity.
T-rank’s Recommandation
To satisfy the criteria in AMLR letter by letter to the greatest extent possible, the following models should be turned on:
- – Integrated ownership, 25% (or a lower threshold)
- – Integrated voting rights, 25% (or a lower threshold)
- – Control, 100% threshold
- – Control of Ownership
- – Ownership in Mother
From a professional point of view, it could be argued that it would be better to lower the Control threshold to 99.8% or similar. This would include persons who can, in practice, exercise control.
However, T-rank still maintains that the models we have advocated for years—Integrated ownership combined with Voting Power—provide a better indication of actual beneficial ownership than the identification rules in the AMLR. The AMLR rules will miss a few influential owners and include some persons who have neither any kind of shareholder influence nor significant ownership.
Obliged entities subject to the AMLR can hardly afford to fail to include specified criteria. We advise adding Voting Power with a threshold of about 50% as an additional criterion in order to capture natural persons with significant influence who are not picked up by the strict AMLR identification criteria. This criterium could replace Ownership at each level since it captures a superset of the other. Thus, T-rank’s recommandation for obliges entities according to AMLR becomes:
- – Integrated ownership, 25% (or a lower threshold)
- – (Integrated voting rights), 25% (or a lower threshold)
- – Voting Power, > 49.8%
- – Control of Ownership
- – Ownership in Mother
The reason we put Integrated voting rights in parentheses is that Voting Power could be argued to be a better criterion, thus covering the intention behind Integrated voting rights.
Cascading approach
Another new feature in our beneficial ownership toolbox is native support for a so-called cascading approach. When using a cascading approach, a set of primary BO models is tried first. If no BOs are found, a set of secondary models is tried, and so on until BOs are found or no additional sets are defined. A common use of a cascading approach is to define a set of preferred models as primary, and then define the role model as secondary.
Written by Svein Parnas – svein (at) trank.no