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H O W W E L L D O Y O U R E A L L Y K N O W W H O Y O U R C U S T O M E R I S ?

April 2019

Ivana Halapir Grgić, Manager Corporate Secretarial Services TMF Group

Katarina Paić, Legal executive & KYC Specialist TMF Group

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EMEA excl. Benelux

Americas

Benelux

APAC

Emerging offices

T M F G R O U P S U C C E S S F U L L Y C O M B I N E S G L O B A L R E A C H W I T H L O C A L K N O W L E D G E

B E N E F I T S O F

T H E G L O B A L

P L A T F O R M

Present in over 80 jurisdictions

More than 7000 qualified legal, paralegal, HRand payroll and accounting experts

Comprehensive range of global businessservices – Accounting and Reporting,Corporate Secretarial, HR and Payroll, KYC,International structuring, Structured financeetc.

In-depth knowledge of local compliancerequirements

Established processes and project teams tomanage your entities’ lifecycle

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01

02

03

How to efficiently perform customer screening

Case study - KYC for a large company undergoing restructuring

Changes in local AML legislation – Croatian UBO Register

K N O W Y O U R C U S T O M E R ( K Y C )

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Focus on regulatory requirements

Focus on clients

Local compliance

One-off checks

CURRENT EVOLVING

Focus on reputation risk and maximise ratings with ratings agencies, supervisors authorities

Focus on investors, suppliers and partners

Focus on local and global compliance

Continuing monitoring

Know Your Customer (KYC) requirements imply that companies must carry out due diligence to verify a client’s identity and prevent identity theft, fraud and money laundering

KYC is also required for country-specific regulations, international Anti-Money Laundering (AML) regulations, the Alternative Investment Fund Managers Directive (AIFMD), FATCA and CRS

Additional requirements are global and local sanction list and anti- terrorism financing laws.

What is KYC

C H A N G I N G W O R L D R E Q U I R E S R E A L L Y K N O W I N G W H O Y O U W O R K W I T H

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KYC is not always at the top of mind of an investor; the info is often delivered incomplete

Risks of highly sensitive clients’ data being leaked due to poor data exchange practices

No resource to keep up to date sanction, PEP list and local adverse media

Requirement to do ongoing monitoring

K Y C C H A L L E N G E S T H A T C U S T O M E R S A R E F A C I N G

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STEPPLAN

C U S T O M E R D U E D I L I G E N C E A N D S C R E E N I N G

Customer identification

and verificationDefine set of required documents – Questionnaire, Company extract, passport

copies, certified ownership structures

Structure analysis

PEP/ sanction and bad

press checks

Report

Analize ownership structure and identify ultimate beneficial owner based upon

mutually agreed precentage

Verification of UBOs, board members, Politically Exposed Persons (PEPs),

business activites via SEO.Next Compliance Database

Providing general customer information, business activites, directorship

information, UBO information, PEP/sanction hits, Adverse media hits, suggested

risk level

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separate compliance database built on a SharePoint platform

client has viewing rights and access solely to his/her clients

Linked with local and international sanction list

used to screen names of clients, associated and business partners against criminal records, investigations, PEPs and other potential controversies

C O M P L I A N C E D A T A B A S E

S E O . N E X T

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C O M P A N Y S T R U C T U R E S

SIMPLE

COMPLEXE

XT

RA

Less than 3 ultimate beneficial owners,

legal structure is in-country

2-3 ultimate beneficial owners, legal

structure is cross country, multiple legal

forms, non UBO directors

More than 3 ultimate beneficial owners, non

UBO directors, non EU UBOs, more than 2

layers in a legal structure, multiple legal

forms

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largest holding company in the region was undergoing a major restructuring

creditors will gain shares in the company ownership in a form of „New Instruments” - convertible bonds and depositary receipts

KYC approval was a precondition for receival of „New Instruments”

approx. number of creditors: Trade (300), Financial (100), Noteholders (400)

location of creditors: Croatian and foreign (world wide)

Type of legal forms: ltd, jsc, limited partnerships, banks, funds, trusts, foundations, leasing companies, crafts, natural persons, state authorities (ministries, cities, municipalities)

Timeframe: 6 months

C A S E S T U D Y : K Y C I N L A R G E C O M P A N Y U N D E R G O I N G R E S T R U C T U R I N G

P R O J E C T S P E C I F I C S

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1. Collection and review of received documentation

2. Processing fully completed KYC packages

3. Review of KYC processed creditors

4. Reporting

4 PROJECT STAGES PERFORMED ACTIVITIES

1. Data collection from creditors via Share File Platform, analysis of received documents, revert to creditors for additional info if needed, MasterFile

2. Upload data in compliance database, verification of received information, risk qualification, CDD (bad press check, sanction sreening)

3. Peer review – 4 eyes principle

4. CIAF – tailormade Client Identification Acceptance Form (final risk classification)

Fully completed and signed KYC Form

An extract from official register (not older than 3 months)

Signed and dated ownership structure showing UBO holding at least 10% of the shares in the entity

Supporting documents evidencing the ownership structure

Certified passport/ID copy of UBO

Statement with the names of each natural person authorized to bind the entity

REQUIREMENTS FOR CREDITORS

C A S E S T U D Y : K Y C I N L A R G E C O M P A N Y U N D E R G O I N G R E S T R U C T U R I N G

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TRUST LIMITED

PARTNERSHIPFUNDS

• Relevant document –

Trust deed

• Revelant persons –

Trustor/Settlor (Trust

founder), Trustee (Trust

manager), Beneficiary

(Trust user), Protector

• Important to identify all

above mentioned

persons, especially

Beneficiaries and their %

share within the Trust

• Relevant document -

Prospectus

• Consists of General

partner and Limited

partner

• Ownership structures

usually show natural

persons on the top of

General Partner

(controlling persons)

and natural persons on

the top of the entire

partnership (UBOs)

• Important to identify

both sides

• Relevant document –

Annual Financial

Report, Prospectus

• Important to identify

persons with

significant control in

managing this entity

such as board

members or persons

excercising control

over the entity assets

such as fund manager

P R A C T I C A L H I N T S T O I D E N T I F Y U B O I N S P E C I F I C L E G A L E N T I T I E S

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5 T H A N T I - M O N E YL A U N D E R I N G D I R E C T I V E

New Amendments and challenges

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01 02 03 04

Virtual

currencies

Cooperation

& AlignmentUBO Register

High Risk

Countries

Extending Anti-

Money

Laundering

financing rules to

virtual currencies

Exchange of

information

between anti-

money

laundering

supervisors

Who really owns

Companies,

Trusts and other

legal

arrangements

Which high-risk

Countries are

you working with

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02

03

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What is UBO register and who is obliged to submit data in UBO Register

Establishment of UBO register in Croatia

UBO forms, due dates and fines for non compliance

Public access to UBO register

U B O R E G I S T E R

Implementation and key requirements

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Assessment based on:

systemic impact on the integrity of the EU financial system

reviewed by the International Monetary Fund as international offshore financial centers

economic relevance and strong economic ties with the EU

the availability of information on the beneficial owners of companies and legal arrangements ( transparency of UBO registers )

when dealing with such cases of high-risk and with such business relationships or transactions, Member States should require obliged entities to apply enhanced customer due diligence measures to manage and mitigate those risks.

New amended list of third countries with weak anti-money laundering and terrorist financing regimes (5th AML Directive)

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New amended list of high risk third countries

(1) Afghanistan

(2) American Samoa

(3) The Bahamas

(4) Botswana

(5) Democratic People's

Republic of Korea

(6) Ethiopia

(7) Ghana

8) Guam

(9) Iran

(10) Iraq

(11) Libya

(12) Nigeria

(13) Pakistan

(14) Panama

(15) Puerto Rico

(16) Samoa,

(17) Saudi Arabia

(18) Sri Lanka

(19) Syria

(20) Trinidad and

Tobago

(21) Tunisia

(22) US Virgin Islands

(23) Yemen

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1. What is UBO register and who is obliged to submit data in UBO Register

Central

data

base

on

UBOs

for

other legal

arrangements Companies

Foreign

branches

Foundations

Associations

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When in Croatia...

Entities in which Republic of Croatia is not the only Shareholder

Trusts and entities similar to trusts:

a) Settlor/Trustee/Protector/Beneficiary with domiciliation/ currently residing in Republic of Croatia

b) Settlor/Trustee/Protector/Beneficiary acquiring real estate in Croatia or establishing business relationship with entities obliged to conduct Customer Due diligence measures in accordance with AML laws ( Banks and other Finacial Institutions, Lawyers, Notary Publics, Leasing Companies etc.)

What is UBO register and who is obliged to submit data in UBO Register

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Companies and similar legal entities :

Every natural person owning 25% or more of shares/ voting rights or in any other way exercising ultimate control over the Company by determining business decisions on General Assembly (difference between direct and indirect ownership)

Trusts and similar legal entities :

Every natural person who is ultimately controlling trust having direct or indirect ownership of the trust i.e. requirement for identification of :

- the settlor

-the trustee

-the protector

-the beneficiary

2. Establishment of UBO register in Croatia and key requirements for UBOs

2020

UBOs are obliged to submit in UBO Register :

2. Data on UBO to be submitted in UBO Register

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02

03

04

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06

Name and surname

Country of residence and citizenship

Date of birth

Identification number and data on issuer of this number

Nature and extent ( %) of ownership

Ownership structure and data directly related to ownership of the entity

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UBO Forms:

a) Hard copy of UBO forms have to be delivered directly to Financial Agency

b) Soft copy of UBO forms have to be delivered by using electronic certificate and submitting UBO data online ( electronic certificates similar as for submitting AFS to Tax Authority )

Entities can grant Power of Attorney to proxy holder and allow them to submit UBO forms

UBO Register supervision:

Tax Authority

Financial Agency

3. UBO forms, due dates and fines for non compliance

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Due Dates for delivery of UBO form :

New 5th AML Directive has been announced on 19th. Of July 2018 and all member states have to transpose above-mentioned Directive by 10th. January 2020

On 5th of April 2019 Croatian Parliament has passed the final proposal on Amendments in AML laws in order to implement and comply with recent changes imposed by 5th. AML directive

Inital collection of data in UBO register from May until December 2019

Public approach to UBO register from January 2020

New UBO forms have been provided by Croatian AML office

3. UBO forms, due dates and fines for non compliance

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Fines for non compliance

HRK 5,000.00 (apr.700 EUR) to HRK 350,000.00 (apr.46,000 EUR) shall be imposed to the legal

person for the misdemeanor if they not dispose of appropriate, accurate and updated data

prescribed on their UBOs or data is not delivered in due dates

HRK 5,000.00 (apr. 700 EUR) to HRK 75,000.00 (apr. 10 000 EUR) shall be imposed to the

Management Board Member (in case of Trust-Trustee ) for the misdemeanor if they not

dispose of appropriate, accurate and updated data prescribed on their UBOs or data is not

delivered in due dates

HRK 750,000.00 (apr. 100,000 EUR) shall be imposed to the legal person for the most severe

misdemeanours or misdemeanours comitted in return

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4. Public access to UBO register

Authorised

persons from

AML office

Authorised persons in

Public bodies

Authorised persons

exercising DD according to

AML laws

Free of charge, in

a timely manner

Domestic and foreign legal

entities

Free of charge, in

a timely manner

Fees for granting

access to UBO

register ( without

evidencing

legitimate interest)

Fees for granting

access to UBO

register

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QUESTIONSAND ANSWERS

KATARINA

&

IVANA

??

? ?

??

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H A V E M O R E Q U E S T I O N S ?

Contact us:

Ivana Halapir

ivana.halapir@tmf-group.com

Katarina Paić

katarina.paic@tmf-group.com

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T H A N K Y O U

Whilst we have taken reasonable steps to provide accurate and up to date information in this

publication, we do not give any warranties or representations, whether express or implied, in

this respect. The information is subject to change without notice. The information contained

in this publication is subject to changes in (tax) laws in different jurisdictions worldwide.

None of the information contained in this publication constitutes an offer or solicitation for

business, a recommendation with respect to our services, a recommendation to engage in

any transaction or to engage us as a legal, tax, financial, investment or accounting advisor.

No action should be taken on the basis of this information without first seeking independent

professional advice. We shall not be liable for any loss or damage whatsoever arising as a

result of your use of or reliance on the information contained herein.

This is a publication of TMF Group B.V., P.O. Box 23393, 1100 DW Amsterdam, the

Netherlands (contact@tmf-group.com). TMF Group B.V. is part of TMF Group, consisting of

a number of companies worldwide. No group company is a registered agent of another

group company. A full list of the names, addresses and details of the regulatory status of the

companies are available on our website: www.tmf-group.com.

© 2018 TMF Group B.V.