Beneficial Owner

The concept of beneficial owner is based on the presumption that a legal person or legal arrangements are fictional person in law, which is managed, coordinated or controlled by a natural person.

Legal persons and legal arrangements are obliged to disclose information of the beneficial owner, as well as subjects of Law on the Prevention of Money Laundering and Terrorism and Proliferation Financing (Law on the Prevention, when conducting customer due diligence and know your customer procedure have an obligation to identify and verify the beneficial owner.

Article 1, subparagraph 5 of Law on the Prevention establish:

a. as regards legal persons - a natural person who owns, in the form of direct or indirect shareholding,[1] more than 25 per cent of the capital shares or voting stock of the legal person or who directly or indirectly controls it;

b. as regards legal arrangements - a natural person who owns or in whose interests a legal arrangement has been established or operates, or who directly or indirectly exercises control over it, including who is the settlor, the trustee or the protector (manager) of such legal arrangement.

According to Article 18, paragraph three of Law on the Prevention, the beneficial owner shall be ascertained and verified by using information or documents from the Enterprise Register of the Republic of Latvia.

It should be noted that the disclosure of the beneficial owner is not limited only to verification of information to Enterprise Register of the Republic of Latvia or other state registers, i.e. the registered information has to represent the “real setting.”

Moreover, Article 11.[1], paragraph five of Law on the Prevention provide that the subject of the Law should be able to prove that the extent of the customer due diligence corresponds to the existing money laundering and terrorism and proliferation financing risks. Higher risk jurisdictions are considered risk-increasing factors (see Article 11.[1], paragraph three of Law on the Prevention).[2]

Based on the risk assessment, the beneficial owner is determined:

1. by receiving a statement on the beneficial owner approved by the customer;

2. by using information or documents from the information systems of the Republic of Latvia or foreign countries;

3. by determining the beneficial owner on its own if information on him or her cannot be obtained in any other way.

In the case that all possible means of determination has been exhausted and the beneficial owner still cannot be established, a natural person who holds a position in the executive body shall be considered as the beneficial owner, if any doubts of “real” or another beneficial owner have been excluded.

---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- [1] In case of indirect shareholding the control is exercised through another person (natural or legal person).

[2] The list of circumstances is not exhaustive.