Following the introduction of a public register of persons with significant control for the British companies and LLP (from April 2016), as well as for the Scottish partnerships (since June 2017), some British dependent territories, under pressure from the UK itself, have created similar registers / databases. However, these centralized registers will be closed, and the access to data from them will be available only to the British competent authorities and only upon request. This decision has become a compromise after many years of negotiations and frictions, since the overseas territories, although partially subject to the law of Great Britain, are still self-regulatory. On the one hand, access to these closed registers / databases will enable the UK law enforcement agencies to monitor tax evasion, as well as terrorists and criminals hiding behind the anonymous companies. On the other hand, this will put an end to the requirements for the introduction of open registers of beneficiaries in the countries partially controlled by Great Britain. Among such states are the Cayman Islands, the British Virgin Islands, the Isle of Man, Bermuda, Guernsey, Jersey, and others. As the British Virgin Islands (hereinafter - the BVI) are the most popular with our clients among offshore jurisdictions, we will consider legislative changes in connection with the agreements reached with the UK.

So, after the exchange of official communications between the governments of the BVI and the UK on June 12, 2017 the Law on Beneficial Ownership Secure Search System (hereinafter - BOSS) was adopted, and from June 30, 2017, it came into force. In accordance with this law, at the moment, the work is in progress on creating a central database (server) on the BVI, which will contain all the information and supporting documents about the beneficial owners of all corporate entities and legal entities registered in this jurisdiction. This database will be used to facilitate the effective transmission of information on the ultimate beneficial owners by the competent BVI authorities at the request of an authorized law enforcement agency of the United Kingdom.

The beneficial owner in the BOSS Act is defined as a natural person who ultimately owns or controls directly or indirectly 25% or more shares or voting rights of a legal entity. It should be noted, that, however, there is a threshold of 25% or more for the purposes of the BOSS legislation for claiming a report on a beneficial owner, in other BVI legislation, on combating terrorism and money laundering, it is set of more than 10%. This means that the registration agent can request information about all persons who control more than 10% of the company’s shares. The information about the trustee or other person who controls these legal relationships is subject to disclosure, as well as information about the founder or another person with whom a nominal agreement is concluded.

The BOSS Act allows each Registered Agent to create its own databases for storing information about the ultimate beneficial owners of legal entities, which, in turn, will be available to officials of one of the following authorized competent authorities:

  • Financial Investigation Agency;
  • Financial Services Commission;
  • International Tax Office;
  • Chamber of Attorney General.

The BOSS Act requires to provide the following information for each beneficial owner:

  • name;
  • address of residence,
  • date of Birth,
  • citizenship.

The requirements for storing information in BOSS are also listed in the Law. The requirements for the relevance of data in BOSS are also established. The companies are required to notify the registered agent of any changes in the beneficial ownership or the information about the beneficial owners provided by law for filing, within 15 days from the receipt of information about such changes, indicating the date of these changes. After this, the registered agent must take all necessary steps to update the BOSS system within 15 days after receiving the notice of the changes.

Strict penalties are imposed on both companies and registered agents for non-compliance with these requirements. Strict punishment for registration agents (fine or imprisonment) is also provided for provision of knowingly false information concerning a corporate legal entity, since this is considered a crime. In conclusion, we note that the BVI has concluded a number of agreements on the exchange of tax information with other countries. In addition, information on beneficial owners has always been available to competent authorities that have submitted a proper request to the relevant BVI body. And this means that BVI, like other offshore jurisdictions, are moving towards transparency with long strides, and the offshore companies are gradually losing their anonymity.

The newspaper “Journal du Dimanche” previously published information about the intentions of the French President Francois Hollande to hold a meeting with the leaders of Germany, Spain and Italy on March 6 in Versailles, dedicated to the future of the European Union. This mini-summit, among other things, should have to demonstrate the unity of the leaders of the four major European powers of the euro zone in the face of the many threats and crises that the EU is currently facing. The agenda also included the study of the issues “related to ensuring the strengthening of the development of the European Union”.
On March 6, the government supported the changes to the Law on the Financial Instruments Market, the Law on Alternative Investment Funds and their Managers, as well as the Audit Services Act. What is the ultimate goal of these changes? They should make the EU financial market more transparent and stable, reduce systematic risks, protect depositors, and ensure the effectiveness of financial markets and reduce the costs of their participants. The changes in the laws have been designed to adopt the Directive of the European Parliament and the Council on the markets of financial instruments.
In the process of painstaking work over the directives on the part of institutions and EU Member States, the assessment of the existing supervisory practice of the financial market was made, insufficient transparency in the general financial markets was recognized, actually taking place and partially unregulated trade actions by the regulations were analyzed.
The outcome of the integrated assessment was the conclusion that the existing regulation is not sufficient to ensure the full stability of the financial markets and transparency of their activities. Thus, in order to solve and eliminate the identified shortcomings, the draft directives have been developed.
By adopting the Directive, the financial institutions of the Member States have provided the comprehensive regulation to ensure the protection of depositors. An important part of this regime is the protection of customers’ funds and financial instruments. The duties of the investment brokerage companies is the implementation of appropriate measures to protect the rights in respect of securities and cash assets entrusted to the investment brokerage company, as well as the property rights of the depositor.
Investment brokerage companies will have to implement the appropriate specific order to ensure the protection of financial instruments and customer funds. The main goal of all legislative changes under consideration remains clarification of the legal regulation of investor protection and increase of the transparency of related procedures.
We will hope that, in accordance with the overall strategy, a single integrated legal and economic approach to the legislative reform of the EU countries will effectively ensure fair treatment for all participants in the financial market. And, in order to find always the necessary benchmarks in constantly changing trends and organize effectively your business in the EU and not only - contact the specialists of the company Finance Business Service!

In a press release of January 29, 2018, the Council of Europe announced the second set of additional directives on the negotiations detailing the position of the EU-27 (27 EU Members without the UK) regarding the transition period with respect to Brexit. These directives give the Commission the authority to initiate discussions with the UK on the terms of Brexit and establish a transition period, no longer than until December 31, 2020.
During the transition period in the UK, full and constant application of the EU legislation is provided. However, the state will no longer participate in the EU administration and the decision-making process.
On January 30, 2018, the EU Commission published a document warning the companies of the key challenges in the customs and VAT that they will have to be overcome when the United Kingdom is not a Member of the EU. If no other transition period is agreed between the EU and the UK, the European Customs and VAT regulations in the UK will no longer apply from March 30, 2019, as the UK officially announced its intention to leave the EU on March 29, 2017. This document provides a brief overview of the customs and VAT implications that will arise from the actual date the UK left the EU. From the date of delivery to and from the UK, it will be qualified as imports and exports, rather than intra-Community sales (including the filing of customs declarations, the application of customs duties, etc.).
The document also emphasizes that a number of licenses (for example, customs licenses, the status of the Authorized subject of economic activity) issued by the UK government will no longer operate in the EU and the imports to the UK will no longer be able to use the preferential tariff agreements concluded by the EU with third countries.
A number of other issues, such as the impossibility of the UK to use the European MOSS system and VAT refund procedure after the end of EU membership, are also briefly considered. Moreover, the British companies will be treated as non-EU companies, so they may need to appoint a fiscal representative in a number of Member States for their local registration as VAT payers.
On November 7, 2017, the UK government also published a draft law on taxation (cross-border trade), which is part of the basic legislation establishing the British legislative framework in the field of customs and VAT. At this stage, there are no detailed provisions on many issues. The bill has passed the second reading in the Parliament on January 9, 2018. At present, there is no declared position regarding the transition period, but it is expected in the upcoming government statements.
According to the information document to the British bill, it is designed in such a way to be flexible enough for a range of possible outcomes of the negotiations, including a transition agreement and a scenario where the agreement has not been reached.
In any event, there is uncertainty in the final form that Brexit will acquire and its timing. In this regard, it is recommended for the British companies, as well as European companies with British ties and interests to prepare for the worst possible option, the so-called “complex Brexit scenario”. Along with other issues for the settlement, the implications for VAT and customs clearance will be central to the preparation of Brexit.

On December 5, 2017, the European Council adopted amendments to the legislation regulating VAT rules for online sales of goods and services in Europe, developed by the European Commission a year ago. These legislative changes were adopted within the framework of the strategy of “single digital market” and aimed at simplification of the payment of VAT on purchases of goods and services on the Internet by the European consumers.

The changes assume:

  • simplification of the current Mini One Stop Shop (MOSS) mode for cross-border telecommunications, broadcasting and electronic services
  • transition to taxation at the place of destination (location of the recipient) and simplified reporting through MOSS for remote sales of goods
  • introduction of an obligation to pay VAT for electronic interfaces (for example, platforms) that facilitates the delivery of low-value goods imported or sold in the EU by the suppliers from outside the EU

Since the new legislation consists of a two-tiered package of measures, it comes into force in two phases: in 2019 and 2021.

From 2019, the changes will touch the MOSS system. There is an exception that allows micro-enterprises of the EU to pay for the supply of telecommunications, broadcasting and electronic services (TBE), the volume of which is below the threshold of 10,000 euros per year, in the country of their registration. In addition, many of these enterprises will receive the exemption from VAT payments in practice due to the fact that their supplies often fall under the system of benefits for domestic small and medium-sized enterprises (SMEs).

Another simplification aimed at reducing the administrative burden of SMEs in sales of B2C below 100,000 euros per year is the requirement of only one confirmation of the location of its customers and therefore, of the country of taxation.

The next softening concerns the rules for billing: from 2019, the Member State in which the provider is identified within the MOSS will independently determine the need for billing for cross-border telecommunications, broadcasting and electronic services.

In 2021 the most significant changes concerning remote sales will enter into force.
The new rules will allow the companies that sell goods through the Internet to fulfill their VAT obligations within the EU countries through a digital online portal (OSS), organized by their own tax administration in their own language. At the moment, these rules exist only for the providers of electronic services.

It is supposed to use two OSS systems in parallel for the declaration of all cross-border sales on the basis of the tax portal of the Member State. The first one will cover remote sales of the goods within the EU, B2C TBE services, as well as other B2C services provided by a taxable person outside its Member State.

The second OSS will cover remote sales of goods imported from third countries or territories (outside the EU), which actual value is 150 euros or less. Taxable persons outside the EU will be able to use this OSS only if they designate an intermediary in the EU or if they are established in the country with which the EU has an agreement on mutual assistance and goods are shipped from the same country. For consignments with an actual cost of less than EUR 150, sent to the EU by the companies that have not chosen this OSS scheme, special agreements will be applied. In this case, the logistics intermediaries can declare and pay VAT in the Member State of destination in a simplified manner, and possibly, taking into account the standard VAT rate (if such is imposed by the Member States).

At the same time, there will be elimination of the current VAT exemption for the import of small lots for an amount not exceeding 22 euros from outside the EU, which leads to unfair competition and infringement of companies in the EU (which must apply VAT regardless of the value of goods sold).
The responsibility of trading platforms for B2C deliveries of imported goods or suppliers not included in the EU

For the first time, large online trading platforms will be responsible for ensuring the payment of VAT on sales on their platforms, which are produced by the companies from third countries for the consumers in the EU.

Electronic interfaces become the main responsible party for the deliveries made with their help, even if the actual supplier is registered as a VAT payer in the country of destination. The need to introduce this measure is caused by the use of mechanisms of cross-border fraud, in which the goods imported for remote sales enter the European Union without VAT, in some cases through such interfaces. In such cases, Member States find it difficult to contact the original foreign supplier in order to levy VAT.

With this approach, the EU imposes the responsibility on electronic interfaces for collecting VAT on sales of goods along with an already existing rule for electronic services that are sold through such trading platforms. Therefore, the EU joins other jurisdictions, such as Australia and India, implementing or considering such an approach.
From 2021, some changes in the technical functioning of OSS will also come into force. This relates to the specific rules for the terms of filing the declarations (extended to 30 days after the end of the quarter), possibilities of adjustments of the past declarations and coordination of the audit of transactions submitted under the OSS.

In order to implement these changes, the European Commission is charged with developing rules in accordance with the principles of effective regulation, including consultation with stakeholders and impact assessment. In particular, this will focus on creating the basis for the claimed provisions applicable to electronic interfaces, as well as for the timely introduction into the relevant customs systems that will have to support the import OSS as of 2021.

By the end of 2019, the European Commission will assess the readiness of these measures, which could lead to a full or partial delay in the changes of 2021 if the problems are discovered that prevent the correct application of the new rules.
These initiatives are the next step towards the creation of a single European VAT area in accordance with the recent proposals of the Commission on reforming the European VAT.

The format and methods of delivery of many goods refer them to the category of services, especially if they are transmitted over the Internet, such as e-books, music downloads, streaming of content. The regime of VAT for this particular subcategory of services provided electronically has undergone significant changes lately. In this blog, we will consider the requirements of the current European legislation, and we will try to cover the coming changes in this area in the next ones.
In accordance with the European legislation, came into effect from January 1, 2015, telecommunications, television and radio broadcasting, as well as electronic services, are subject to VAT at the location of the client, whether it is a business or a consumer, located in or outside the EU .
However, in order to ensure the correct taxation of these services, the supplier needs to determine the status of his client (whether he is a VAT payer), as well as his location.
The easiest and most reliable way to define whether a customer is a business or a consumer is to ask him for a VAT number. Suppliers can check the VAT numbers of their customers using the website of the VAT Information Exchange System (VIES): http://ec.europa.eu/taxation_customs/vies.
The location for the business (VAT payer) is defined as the country of registration or the country in which it has a permanent location and receives the service. The country of registration or the country in which territory he has a permanent address or usually resides is the location for the consumer (not a VAT payer).
If everything is more or less clear with telecommunications and broadcasting, but we should consider the concept of electronic services in more detail, since we face it more often than we think. In the European legislation, electronic services are defined as services provided through the Internet or electronic network, the nature of which makes their provision automated with minimal human intervention, as well as the provision of which is impossible in the absence of information technology.
There is rather extensive list of electronic services, but we list only the main ones:

  • digital products in general, including software and updates to it;
  • provision or maintenance of the presence of business or personal presence in an electronic network, such as a website or web page;
  • e-mail, automatically created from the computer;
  • hosting of web sites and web pages;
  • administration of remote systems;
  • online data storage, where specific data is stored and retrieved electronically;
  • access or uploading of photos, graphics or screen savers;
  • digitized content of books and other electronic publications;
  • subscription to online newspapers and magazines;
  • blogs and website statistics;
  • online news, traffic information and meteorological reports;

  • provision of advertising platforms, including advertising banners on the website / web page;
  • use of search engines and Internet directories;
  • access or download of music, movies, games on computers and mobile phones.

In order to declare and pay VAT (both in the EU and outside), a supplier can use the online declaration / payment method via Mini One Stop Shop (“MOOS”) by registering on the relevant web portal in the EU country, where he is registered as the VAT payer. It should be noted at once that this scheme is not an obligatory, but a simplifying measure. It allows taxable persons not to be registered in each of the Member States where their customers are located.
In practice, according to this scheme, a taxpayer registered in the MOOS in the EU Member State (state of identification) electronically submits a quarterly MOOS declaration which lists the supply of services to tax-exempt persons in other EU member states (consuming states) together with VAT subject to withholding. These declarations together with the VAT paid are transferred then by the State of identification to the appropriate consuming States through a secure communications network.
When cross-border services are provided to business, a client from another EU country (relative to the supplier) will independently pay the tax in the framework of the reverse charge mechanism. This system allows the buyer of the service to calculate the tax at the rate of his country and report on it by indicating the amount of tax payable in the declaration and the same amount of tax to the deduction. Actual cash flow does not occur, but the controlling bodies receive information about the movement of services within the EU.
The rules of VAT on the taxation of electronic services, telecommunications services, as well as television and radio broadcasting services can be visually presented as follows



The exception to the general rule is the rule of effective use and consumption. It is used when:

  • the place of delivery is in the European Union, but the services are consumed outside;
  • the place of delivery is outside the EU, but services are consumed in the EU.

Efficient use and consumption take place when the client actually consumes the services not at the location, regardless of contractual terms and payment.
For example, the services for the provision of banner advertising on the website of the publication, provided by the company in Germany for business in the United States, as a general rule, are taxed at the customer’s place of registration, and, accordingly, the European VAT is not charged. However, if the website of the publication is used for an advertising campaign within Germany, the German competent authorities, using the rule of effective use and consumption, may decide that VAT is levied in Germany.
So, the essence of the legislative requirements for levying VAT from electronic, telecommunications, and television and radio broadcasting services is to ensure the suppliers to pay VAT for such services in each EU country in which they provide them. It may lead for many companies to a legal requirement to register VAT by the payers separately in each EU country where they have clients. This is the reason why the MOSS system has been created, by which the declaration and payment of VAT on several European countries can be made through a single electronic declaration submitted to the local tax authority.

Yesterday, on January 17, the Cabinet of Ministers of Ukraine approved an order “On the approval of the development concept of the digital economy and society of Ukraine for 2018-2020 and approval of a plan of action for its implementation”. This is reported by the IA “RBC-Ukraine”.
The project is mainly aimed at implementing the initiatives of the “Digital Agenda of Ukraine-2020” in order to remove the barriers for the digital transformation of Ukraine in the most promising fields by stimulating the economy and attracting investments, as well as overcoming the digital inequality, deepening cooperation with the EU in the digital sphere and developing innovative infrastructure of the country and digital transformations.
The Prime Minister of Ukraine Vladimir Groysman wrote about it on his Facebook page: “The adopted Action Plan is very ambitious and innovative - it provides for the development of Industry 4.0, smart factory, digital jobs, STEM-education and digital educational services, digital infrastructures for the Internet things, blockchain, eHealth and e-security, etc. Ukraine is obliged today to launch a large-scale digitization of all branches of the economy and basic spheres of life, such as education and medicine, investing maximally in the development of digital infrastructures, innovations and modern technologies”.

After conducting a series of consultations with the public and interested persons, technical studies and assessments of the financial and economic consequences, the Government of Malta intends to carry out a full reform of the current legislative framework regulating gaming activities.

The proposed reform implies the abolition of all current legislation regulating gaming, and the introduction of a single law - the Gaming Act. The law will enable the competent minister to publish the rules and also give authority to the relevant regulatory body (Malta Gaming Authority - hereinafter “MGA”) to publish the Directives and other regulations if necessary, thereby ensuring timely and flexible interventions, especially with regard to technical specifications and processes.

Инфографика

Within the framework of optimizing the supervision and modernization of the existing gaming infrastructure, the main state priority in the gambling sphere will be the flexibility of the regulator in the decision-making process and the reduction of the unnecessary regulatory burden, as well as the simultaneous strengthening of supervision in the spheres of the highest risk.

One of the main changes in the course of the reform is the replacement of the current cumbersome system with many types of licenses for a system consisting of only two types of licenses: “business-to-consumer” (B2C) and “business-to-business” (B2B), which will cover different types of activities on several distribution channels. It is expected that this simplification in the licensing system will allow MGA to allocate more of its resources for continuous monitoring of the licensor’s activities for compliance with requirements.

Инфографика


Инфографика

Other changes include:

  • acceptance of the objective instead of an excessively prescriptive normative approach which will ensure the development of innovations;
  • expansion of the powers of MGA in accordance with changes in the sphere of combating money laundering and financing of terrorism;
  • segmentation of officials on key functions within the licensed activities and ensuring the competence of such a person through certification, relevant experience and continuous professional development;
  • strengthening the protection of players by formalizing the intermediary role of the MGA player support department, assigning of allocation of players' funds and transfer to a single database;
  • introduction of new and more effective criminal and administrative proceedings that allow regulated organizations and individuals to appeal against decisions of MGA in the Chamber on reconsideration of decisions of administrative bodies through a judicial procedure based on the principles of natural law, as well as the introduction of distinction between administrative and criminal offenses;
  • introduction of administration system for the operators experiencing difficulties, as well as facilitating the closure of gambling projects (if necessary) to protect workplaces and players’ funds;
  • transition to automated reporting which will promote the observance of regulatory obligations and increase of the supervision of authorized bodies;
  • strengthening the role of MGA in combating manipulation in sports competitions by introducing new obligations for the operators to monitor and identify suspicious sports bets in accordance with the actions of the National Anti-Corruption Committee, in which MGA also actively participates;
  • extension of the license validity period from 5 to 10 years, provided that certain games offered within the framework of state concession are used;
  • rationalization of taxation by combining the two main levels into one stream;
  • exemption of B2B operators from gambling tax (which makes up to 5% of gambling profits from the players in Malta), which will increase Malta's competitiveness as a center for such operators.

It is also interesting to know the attitude of MGA to the use of cryptocurrencies in gambling. Realizing the need to keep up with the times, the body is committed to allow its licensees to use cryptocurrency in the near future. However, remembering about the risks, MGA has conducted an appropriate study to develop adequate legal frameworks and restrictions, including the appropriate requirements of the 4th EU directive on prevention of money-laundering, which will also be amended on the introduction of provisions on cryptocurrencies in the near future. The main results of the study will be submitted for public discussion, which will be held in the fourth quarter of this year, according to which results the necessary requirements and restrictions will be established.

At this stage, MGA is completing the Gaming Act and the relevant by-laws in accordance with the results of the conducted studies and public consultations. Further, this package of legislation will be submitted to the Government of Malta to initiate a parliamentary process for its approval. In addition, MGA promises to ensure an adequate transition period and to supplement the legislation with the provisions providing a smooth transition to the new regulation rules after the reform enters into force.

In recent years, the world community has realized the importance of the corporate transparency. The Panama Papers, high scandals with corruption and tax evasion have caused a radical shift in the attitude towards anonymous companies. The creation of the registers of beneficial owners (hereinafter referred to as "the UBO registers") is considered as the main instrument for increasing transparency. This idea underlies the EU legislation, FATF recommendations, G20 initiatives, the OECD project to combat on Base Erosion and Profit Shifting.

For the EU Member States, the obligation to establish the UBO registers, stipulated by the fourth Anti-Money Laundering Directive (AMLD IV), entered into force on June 26, 2017. However, there are still many questions about how the UBO registers will work in practice. The European states independently define in the national legislation such terms as "legal entity", "legal structure" and "UBO". The concern about data confidentiality is also increasingly growing in Europe, as the countries are discussing who should be allowed access to the registers and for what purpose. Will they provide information only to law enforcement and regulatory authorities, or yet to financial institutions within the framework of the client verification procedure? Each country also decides independently whether the register will be public. At present, it boils down to an interpretation of that idea who has "legitimate interests".
For example, in Germany, since October 1, 2017, the Transparency Register has been introduced. It contains the information on the identity of beneficial owners and detailed information on the share held by the legal entities, partnerships, as well as with respect to the foreign trusts and funds without legal capacity, which purpose is to serve their founders. The register will be available to the government agencies, individuals who are required to verify the clients and the third parties, such as journalists, public organizations and potential commercial partners, provided that any such third party can demonstrate a legitimate interest in the access to the information.
Great Britain has introduced a register of people with considerable control. This register was introduced one of the first - April 6, 2016, but it contains less information than the UBO register (for example, it does not include information about the beneficial owners of the trusts). The registry data is publicly available, but the British law provides for the ability to close registry data in cases when a company or partnership has reason to believe that the disclosure of the controller may endanger the controller or his relatives.
Following the UK, the UBO registers are being introduced in the British-dependent territories. All crown lands and overseas territories have signed an agreement to enhance the exchange of information on the beneficial owners and controllers between the law enforcement agencies. Thus, only this year such commitments in the national legislation have been introduced by the Governments of Jersey, Guernsey, the Isle of Man, the British Virgin Islands and the Cayman Islands. In these countries, the requirements for the companies to maintain the UBO register have already been introduced. The rest offshore British-dependent territories are ready to provide the British authorities with information on the beneficial owners upon request.
As a result of pressure from the Organization for Economic Cooperation and Development, other offshore jurisdictions also introduce into their legislation a requirement for the companies to maintain the UBO registers. So, in the Seychelles, the amendments to the Law on International Business Companies have been adopted in July 2016. The amendments provide for each Seychelles company to maintain the UBO register, keep it at the registration address in the Seychelles and provide data from the register to law enforcement and regulatory authorities upon the request. The similar requirements have also been introduced into the legislation of Belize, having adopted the amendments in the Law on International Commercial Companies, which came into effect from July this year.
In March 2017, the Companies Act has been amended in Singapore, demanding to keep the registers of the beneficiaries and nominees not only for the companies registered in Singapore, but also foreign companies operating in Singapore. Following Singapore, the government of Hong Kong plans to introduce the relevant changes into its legislation. According to the results of public hearings held by the State Financial Services Bureau, the Parliament has developed the amendments to the Companies Act, which were published in the form of a bill in the official newspaper in June 2017. After the adoption of this law, the companies established in Hong Kong will have to provide the information on beneficial owners only to the competent authorities.
In Russia, the requirement to maintain the UBO register came into force at the end of 2016. The companies must keep the information on the beneficial owners for five years. They are obliged to provide this information at the request of “Rosfinmonitoring”, tax authorities and other authorized state bodies.
In Russia, the requirement to maintain the UBO register came into force at the end of 2016. Companies must keep information on beneficial owners for five years. They are obliged to provide this information at the request of “Rosfinmonitoring”, tax authorities and other authorized public authorities.
Ukraine was among the leaders in this race to disclose the ultimate beneficiaries. The Law on amendments to certain legislative acts of Ukraine regarding the determination of the ultimate beneficiaries of the legal entities and public figures was adopted in 2014, and the May of 2015 was established as the deadline for the fulfillment of the obligation to provide the data on the ultimate beneficial owners to the state register. Moreover, all the data provided were entered in the open register.
The UBO registers simplify the process of customer verification, so they could be extremely valuable for a number of organizations conducting detailed inspections (for example, banks and other financial institutions). But there must be a 100% certainty for this that data can be relied on from the register without being exposed to an increased risk. Unfortunately, the request for additional information from the individuals when creating a company does not guarantee the accuracy, timeliness and completeness of the information provided. To reduce the chances for those who wish to provide false or inaccurate information about the beneficial owner in state registers, special technologies that are already used in the private sector should be used (for example, cross-checking, large data, artificial intelligence used to prevent fraudulent Internet purchases).
Currently, there are many other gray areas around how each state implements the requirement to introduce the UBO registers into the national legislation. On the main issues - who is the beneficiary owner, who is the administrator of the register, its controller - each state has a certain freedom in interpretation. All this complicates the use of the information from the official sources, which is rather scattered. It should also be taken into account that state authorities can be also corrupt and protect a certain business or politicians, and no one will ever know about it unless a leakage similar to the Panama Papers occurs.
The real value of the information about the beneficial owners of the companies is the creation of one centralized register. Thus, the Article 30 of the AMLD IV suggests that by 2019 the UBO registers of the EU member states can be linked through the European Central Platform, providing an integrated source of the UBO information throughout the EU. It is still not clear how exactly this will work, but the European Commission is tasked with drawing up a report on the assessment of the technical conditions and the order of ensuring the interconnection by June 2019.
As for the rest of the countries, unlike the EU, it is, of course, impossible to establish universal obligations for all of them. However, the voluntary initiatives already exist, and the countries will join them under the pressure of international and public organizations. After the Global Anti-Corruption Summit in London in May 2016, the OpenOwnership was created - a project to create an open Global Register of Property Rights, the data from which will be interconnected between jurisdictions, industries and with other data sets. The creator and manager of the Global Registry is a consortium consisting of leading international organizations for the struggle for transparency: Transparency International, OpenCorporates, Global Witness, Worldwide Web Foundation, Open Contracting Partnership, ONE Campaign and B Team. The first country that officially confirmed its readiness to integrate data on the beneficial owners of companies into the Global Register was Ukraine in April of this year.
Only in the last year the mankind has significantly advanced in the direction of increasing the transparency of corporate ownership. And this trend is only increasing. The most civilized countries either have already introduced the requirements for the maintenance of the UBO registers, or they are at a certain stage of consultations on this issue. While access to the data remains one of the most controversial issues, the countries are striving to find the right balance between maintaining the principle of transparency and fears about the safety of the potentially vulnerable individuals and cyber security. However that may be, it is becoming increasingly difficult to hide the information about the owners of the company through offshore zones and nominal shareholders. The business will have to revise its corporate structures and learn to work in full transparency, including the ability to track any transactions. The companies need to create a literate history today for both enterprises and their beneficiaries.

On January 3, 2018, a new MiFIDII will come into force, significantly changing the existing requirements on regulating the financial markets in the EU. We will consider in today's blog what exactly is MiFIDII and how the regulation of the European financial markets will change.
The MiFIDII (Markets in Financial Instruments Directive) is the common name for a complex network of legislation, which includes two Directives and three EU Regulations, supported by a number of technical standards and guidelines of the European Securities and Markets Authority (ESMA). The measures provided for in the Regulations are directly applied in the EU member states. For the implementation of other standards and harmonization of the national legislation, the updated requirements are established by the competent authorities in each Member State.
The current MiFID was adopted in 2004 and it operates with small updates of the end of 2007. Thus, the MiFID not only preceded the financial crisis, but it also did not consider many business models and technologies, which today became a common phenomenon. Consequently, there was an extreme need for such an update. When developing the new provisions, the EU legislators, having taken the opportunity, expanded several existing requirements.
The MiFIDII will affect everyone who works with financial instruments, from operational and business models to the systems, data, people and processes. The most interesting for the financial advisors are the provisions that improve the quality of obtaining permits for the activities of investment companies through the introduction of large prudential requirements for the management bodies, systems and controls, as well as higher requirements for the investor protection in terms of categorizing and disclosing the information to the clients, product management and fair attitude to the consumer.
However, now many independent financial advisers (IFA) in Europe are known as the companies exempted from the MiFID regulation in accordance with the Article 3. In fact, this is the status for the companies carrying out a limited range of the activities of the MiFID, allowing them to choose, if they should be considered as "Investment company" or not.
According to the MiFIDII, the company will have to meet a number of requirements to have this status.

  • It is not permitted to withhold money or assets of the client and, therefore, give or borrow money of their clients;
  • The business of such companies should be limited to the "organization" and "consulting" only for certain types of investments - for example, they cannot make deals for their clients or provide trust management services;
  • In their activities, they can transfer the orders only to the regulated investment companies or credit institutions (or their equivalents of the third countries) authorized by the EU Directive on joint investments in circulating securities, to other regulated funds or listed companies in the stock market with variable capital (for example, investment trusts funds).

Any company that goes beyond these limits should be considered an "investment company". Many companies that do not want to be limited by the transfer of their orders will be treated as "investment companies", but they will be categorized as "exempted from the requirements of the EU Capital Adequacy Directive". These are companies which permits are also limited to advising on investing and / or obtaining and transferring orders, without holding money or securities of the client and without providing depository services. However, such exempted companies may transfer the orders to a wider range of persons than those listed in Article 3 and may provide services in respect of derivative instruments that are non-transferable securities.
Any company providing, for example, dealing services or trust management services, will be governed by both MiFIDII and the EU Capital Requirements Directive, which will be generally higher, with a baseline depending on the specific activities of the company.
The IFA now have to evaluate their activities to check whether they are classified correctly. Any company that needs to change an activity permit (for the transition from the category of exempted companies in accordance with the Article 3 to the category of regulated MiFIDs) must apply to the national authority regulating the financial markets with an appropriate statement so that the regulator can review it and make a decision by January next year.
The MiFIDII contains a requirement that the EU member states cannot regulate in accordance with the MiFIDII activities of the companies, not regulated by the MiFID. But, unfortunately, for the companies exempted from the MiFID in accordance with the Article 3, no less burdensome rules are applied. The regulators will apply the rules, which in many cases are "at least similar" to the relevant requirements of the MiFIDII.
Among the key rules applied to all IFAs, regardless of whether there is an exemption under Article 3, are the following:

  • customer categorization, requirements for agreements and information disclosure;
  • incentives, including the accrual of a consultant;
  • independence and conformity;
  • product management (in terms of distributing the products related in compliance with the MiFIDII to financial instruments);
  • literacy and competence.

The rules in which the regulators can provide some discretion to the IFA, exempted from MiFID in accordance with the Article 3:

  • recording of telephone conversations and electronic messages;
  • expediency (existing rules will be applied);
  • systems and management rules (many of them will be used as guidelines, not rules, however, some key requirements, such as conflict of interests, will be applied as rules).

All European IFA, both exempted under the art. 3, and the regulated MiFID, need to review the changes in the rules of the national regulator and conduct an analysis of its activities to assess the segments that are most affected by these changes. By this time, the national regulators should already have a plan and timetable for making appropriate changes, including providing the companies with sufficient time to properly notify the customers and prepare client documentation in accordance with the requirements of the MiFIDII, by the time it comes into effect.

Recently in Australia, the reform of the regulatory environment concerning online gambling has been started. The proposed amendments to the basic federal law on gambling (Interactive Gambling Act - IGA) are at the final stage of consideration by the Australian parliament and are likely to be adopted at the next parliamentary session.
The purpose of the bill on amending the IGA (hereinafter - the Bill) is the combat with illegal offshore gambling and provision of additional enforcement powers to the federal regulator - the Australian Communications and Media Authority (ACMA).
1. Requirement for licensing in Australia
The draft law defines the concepts "regulated interactive gambling services" and "prohibited interactive gambling services". The main difference between these two categories of services is that it is not allowed to provide prohibited interactive gambling services to the individuals in Australia, while regulated online gambling services may be provided, but only by the operators licensed by the Australian regulator and authorized to provide data services in accordance with the terms of their license.
Previously, the certain services classified according to the Bill were excluded from the category of banned (except for "in-game" and instant online lotteries). Now these "exceptions" are attributed to the regulated interactive gaming services that are provided by a licensed operator in Australia.
The bill amends also the Section 15 of the IGA, which provides for criminal and civil liability (fines) for providing the prohibited online gambling service by the operator to the customers in Australia. Therefore, only the operators providing the regulated services in accordance with the license do not bear such a responsibility. At the same time, the fines are very serious: the penalty for legal entities is 4.5 million USD for a criminal offense and 6,75 million USD for a civil offense (for each day of violation).
It should also be noted that the license for regulated services will extend to the services for the Australians outside Australia.
2. Tools of constraints ACMA
The bill grants the ACMA more powers to enforce the compliance with the IGA. These powers include:

  • a more severe regime of civil fines (the ACMA will have a number of enforcement tools at its disposal, including the right to issue official warnings and notices of violations, to impose civil sanctions and seek injunctions);
  • creating the process that allows you to file complaints in the ACMA about the provision and promotion of any unlicensed or prohibited online interactive gambling services, as well as the procedure that allows the ACMA to investigate these complaints.

In addition, the Bill requires the ACMA to create a register of legitimate or "admitted" interactive gambling services. This register will be available to the public on the ACMA website. Accordingly, the register will not include those online game operators who cannot obtain an Australian license to provide services to the Australian customers.
In accordance with the Bill, the ACMA will be able to disclose the information regarding prohibited or regulated interactive gambling services:

  • the Department of Immigration and Border Protection which may file the names of the officials of organizations that violate the IGA in the "list of travel warnings" in order to restrict their movement to or from Australia;
  • foreign regulators which licensed the operator violating the IGA by providing the interactive gaming services to the individuals located in Australia in order to increase global awareness of the IGA and encourage foreign regulatory bodies to assist law enforcement agencies.

3. Prohibition on credits for players
The government also proposed an amendment to ban the provision of lending rates to the Australian consumers, but with some exceptions.
The gambling service providers are exempt from the ban on lending with the annual turnover of rates at least 30 million Australian dollars. If the supplier belongs to a corporate group, the annual worldwide turnover in online rates of the entire corporate group (including holding and subsidiaries) is taken into account. This means that most part of Australian providers of gambling services will not be subject to exemption and they will be prohibited from lending to the customers.
Any company that violates this prohibition will be considered to have committed a crime, for which a fine of $ 90,000 or a civil penalty of $ 135,000 is foreseen.
On February 8, 2017, the bill was adopted by the House of Representatives and submitted to the Senate. In the near future, the Senate may adopt, reject or amend the Bill. However, it is unlikely that this version of the bill will be the subject of considerable debate or further changes in the Senate, since it was adopted by the Chamber without any opposition and with the support of the two leading parties.
If the bill is passed by both chambers of the Parliament, most of the IGA amendments will enter into force 28 days later, and the ban on lending to the Australian consumers will be in six months after the Royal approval of the adopted changes. The companies will have 6 months at their disposal to ensure the termination of the proposals on credit rates for the consumers.
While the discussion on the way to regulate online gambling in Australia is in process, the gambling companies are working in uncertainty. The gambling operators licensed by offshore countries should rethink their business strategy. Basically, such licenses have an unlimited scope, however, after the approval of this Bill, the access to the Australian players without obtaining a local license will be blocked. We remind you that similar rules are already in force in the UK.