Uzbek authorities intend to oblige offshore and foreign companies to disclose information about ultimate beneficiaries

Identification of the beneficiaries of small businesses is not a problem, but as the organization expands, their real owners break up into several levels, and their roots even go beyond the borders of the country (up to offshore zones). Identification of the beneficiaries of large companies, being a complex process, is a “headache” not only for fiscal authorities, but also for other law enforcement agencies.

The need to disclose information about the beneficiaries of business entities is due to the fight against corruption, the legalization of proceeds derived from criminal activities and the effective organization of the fight against the financing of terrorism.

In national legislation, issues related to the beneficiary are defined in 4 acts at the level of law, for example, the law “On public procurement”. In by-laws, this issue is addressed in about 100 documents.

However, these acts do not specify specific criteria for the concept of “beneficiary”, and the descriptions given are of a general nature and do not define the most basic element, that is, ownership (control) over 25% of the company, as provided for by international standards. As a result, beneficiaries include any person who owns one share or controls the activities of a small division of the company. This circumstance requires further specification of the status of the beneficiary.

In order to further develop the legislative framework, the Ministry of Justice has developed a draft law “On the Unified State Register of Last Beneficial Owners”. It sets out specific criteria for the concept of “last beneficial owner”, identifies organizations and enterprises that do not provide information on the last beneficial owners. Some business entities (mainly offshore zones and business entities with a foreign element) are required to disclose information about their last beneficial owners.

The most important issue is that the draft law proposes to form a unified open state register of the last beneficial owners. It is intended to update the information contained therein at least once a quarter. It is also envisaged that the registry will contain a closed type of data (information about a person’s personal data).

One of the main problems that the European Union is fighting is money laundering, the financing of terrorist organizations, tax evasion, in 2015 the Fourth EU Anti-Money Laundering Directive was adopted. In accordance with it, each country must maintain a centralized database (a single register of beneficiaries) containing the necessary information about the beneficiaries of companies.

Failure to resolve the issue of the last beneficiaries may lead to the inclusion of Uzbekistan in various “grey”, “black” lists and impede access to international markets.

For example, an international organization, the Financial Action Task Force (FATF), blacklisted the DPRK and Iran. In addition, 18 countries are on the grey list – Albania, Bahamas, Barbados, Botswana, Ghana, Zimbabwe, Yemen, Iceland, Cambodia, Mauritius, Mongolia, Myanmar, Nicaragua, Pakistan, Panama, Syria, Uganda and Jamaica. Uzbekistan is whitelisted.

In the US, a beneficiary is defined as an individual who owns at least 25% of a company or has strong control over its operations. Information about the beneficiaries must be disclosed during the company registration process, while existing companies will have to provide this information within the next 2 years of their activity. Information must be updated at least once a year. Information about the beneficiary usually includes his date of birth, address of residence and an identity document.

The United Kingdom was the first among the EU countries to introduce the practice of maintaining a register of beneficiaries. The Act “On small business, entrepreneurship and labor relations” of 2015 requires a register of people with significant control.

Since September 1, 2019, Luxembourg has created and put into practice an open registry of beneficiaries (Registre des Beneficiaries Effectifs). Anyone has access to this registry and can get free information about any company.