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28.06.2019

Practical problems relating to beneficial owners

An article dealing with practical problems related to the identification of beneficial owners and liability for failure to provide information and the supply of false information written by Zane Eglīte-Fogele, Partner of PRIMUS DERLING, and Alise Veide, Lawyer of PRIMUS DERLING, was published on 26 June in the issue of iTiesības.

Although legislative amendments requiring every legal entity registered with the Enterprise Register to disclose its beneficial owners entered into force at the end of 2017, there are still a significant number of undertakings which have not yet fulfilled this requirement or have done so as a formality, without considering the substance of the definition of the beneficial owner and control applied.

Practice shows that in many instances failure to provide information is caused by the lack of sufficient awareness of how beneficial owners must be identified. Although failure to provide information or the supply of false information may lead to extremely severe consequences, from problems with credit institutions, sworn notaries, etc. to dissolution of the undertaking and criminal liability for the supply of false information, undertakings are taking the reporting duty too lightly, demonstrating a merely formal approach to the execution of the legislative requirements.

Failure to provide information or the supply of false information may have different effects, i.e. both administrative liability for failure to provide information or documents required by law to the Enterprise Register and criminal liability for failure to provide information or the supply of false information. An administrative offence may lead to a warning or a monetary penalty of EUR 70 to EUR 700 imposed. Meanwhile, recent amendments to the Criminal Law have introduced stricter punishment for failure to provide information or the supply of false information about the ownership of funds and beneficial owners, such as imprisonment of at least two years, short-term imprisonment, community service or monetary penalty.

No beneficial owner or board member has ever been punished for failure to provide information or the supply of false information; however, there is probability of such punishment applied considering Latvia’s active involvement in efforts to combat money laundering and terrorism.

Read the full text of the article in the June issue of iTiesības.

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Derling Primus OÜ

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