From 30 June, UAE-registered companies are required to submit beneficial ownership information to the country’s centralised Ultimate Beneficial Owner (UBO) Register. Companies that fail to disclose face potential monetary penalties or business restrictions. This move is seen as a response to the Financial Action Task Force’s (FATF) 2020 report indicating that “fundamental and major improvements” were needed to avoid the UAE making its “grey list” – a designation which can lead to significant trade loss or increased costs of doing business. The register will only be available to government, however, potentially limiting the effectiveness of the measure.
Reports have increasingly raised concerns about the UAE as a hub for money laundering and sanctions evasion. For example, a December 2020 report from Reuters detailed a scheme involving UAE front companies helping Venezuela avoid US oil sanctions. The London Bullion Market Association also raised concerns related to UAE companies with murky ownership laundering money in precious metals markets. The UAE Ministry of Foreign Affairs has said the country plans to develop “increasingly robust mechanisms to address the challenges brought about by financial crime.”
Beneficial Ownership Register
In August 2020 the UAE approved legislation establishing the UBO Register. The original deadline for companies to disclose was set for 27 October 2020, but was extended to 30 June 2021.
This legislation applies to all companies licensed and registered in the UAE, except for those set up in the DIFC or AGDM financial free zones or entirely owned by the local or federal government.
Companies must disclose:
- Natural persons who own or control, either directly or indirectly, at least 25% of the company’s share capital, or who hold at least 25% of the voting rights, or who control the company through other means, including by holding a right to appoint or dismiss the majority of the directors or managers;
- If no natural person satisfies this criteria, the natural person(s) who exercise control over the company by other means will be deemed the real beneficiary(ies);
- If this cannot be identified, then the beneficiary is the natural person or persons responsible for management of the company.
The 25% UBO standard is set out in the FATF Recommendations, and disclosure represents an important step to improving transparency. However, the contents of this register will be only available to the UAE government, and not publicly accessible. Financial transparency advocates say this will limit the effectiveness of the register.
While the UBO Register is an important first step in improving overall transparency and addressing financial crime in the UAE, the lack of public accessibility may give companies doing business in the UAE little additional comfort. It remains to be seen what other responses the UAE government will make to FATF’s findings.
More than 500,000 firms in the United Arab Emirates (UAE) must now disclose their ultimate owners or face penalties. However, beneficial and legal ownership data will only be disclosed to the government and not publicly available. The Middle East financial hub has tightened up over the last few years as it seeks to avoid inclusion on a dirty money watchlist.