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Revenue and CAB get full access to charity sector beneficial ownership register

20 Jun 2019 / regulation Print

Revenue and CAB get full access to charity register

The charity sector has now been captured by EU anti-money laundering legislation (AML) and must make declarations of beneficial ownership (BO) from this week.

At a Mason, Hayes & Curran (MH&C) briefing yesterday, charity administrators heard that a new burden of compliance is falling on charities as a result of the EU’s Fifth Money-Laundering Directive AML 5

Though charities do not have beneficial owners, and exist to service their users, they are not exempt from the new legislation.

Window

Maureen O’Sullivan of the Companies Registration Office (CRO) said that a five-month window has now opened in which charities must register or otherwise they will be committing an offence.

The AML regulations which came into effect in March oblige charities to hold both internal and external registers.

Despite this obligation, “nothing in the regulations was written with charities in mind,” according to MH&C charities partner Alice Murphy.

She explained that the objective of the AML regulations is to combat money laundering and terrorist financing and not to regulate charities. However, the upshot is that charities must comply with the new regulations, if they are registered companies.

Obligation

This added compliance obligation is of no direct benefit to charities, the seminar heard.

The regulations apply to “every corporation or other legal entity, incorporated in Ireland and limited by guarantee, and also to CLGs (Company Limited by Guarantee) and DACs (a Designated Activity Company)”.

The register must detail the human or ‘natural person’ who ultimately owns or controls this legal entity, the seminar heard.

Most charities don’t have shares but a small number do.

Control

Though charity administrators are not in any way beneficial owners, they are considered under the regulations to be ‘in control’ if they hold more than a 25% shareholding.

Therefore, if there are three or fewer shareholders, these will be considered beneficial owners.

This doesn’t take account of the fact that membership of a company is strictly for charitable purposes.

Though fewer than three shareholders may not have ownership of a charity, they are considered to have ‘control’ and therefore must be named on the beneficial ownership register.

In most charities, no ‘natural person’ will have sufficient control to be listed as a beneficial owner, the seminar heard.

Managing officials

In this situation, the “senior managing officials” become relevant and must be listed in the register.

The register asks for the “nature and extent of the interest held or control exercised”.

This is where the charity explains to officialdom why each person is listed.

The PPS of each beneficial owner is also requested if they have one, though this may be problematic where administrators are not resident in Ireland.

Charities must keep their internal BO register in their office, either on a hard drive or on paper.

Compliance

Charity representatives present were urged to get their compliance affairs in order  by starting and completing a full internal and external register.

Apartment block residents, who run a building maintenance CLG, will also come under the regulations.

Filing is electronic and free through a dedicated CRO portal, Maureen O’Sullivan explained.

Of the 220,000 listings on the main CRO register, only 20,000 are CLGs and a small portion of these are charities.

Information is retained for ten years after the dissolution of any entity and there are two tiers of access – restricted public access, and full access which is available to CAB, An Garda Síochána, fraud investigators and the Revenue Commissioners.

Offence

If a discrepancy is spotted between a charity’s internal and external registers then this must be reported. Failure to do so is now an offence.

Charities often hold assets in trust in accordance with their charitable purpose. They also deal with detailed financial transactions, often in foreign currencies with revenue arriving from different avenues, including donations and state grants.

Those attending the seminar were urged to embrace the new regulations as adding a new layer of trust to charitable administration.

Governance

The Charities Regulatory Authority will shortly be issuing a code of governance for the sector.

Charity administrators were advised to view the beneficial ownership obligations from that perspective and told that improved governance and transparency can only be to their ultimate benefit

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