Category Archives: Criminal Law

International legal dictionary Chambers Europe 2018 ranked Oliver Nääs from LEXTAL among the best Dispute Resolution attorneys in Estonia.

According to Chambers LEXTAL has a well-regarded team known for acting on a spectrum of civil and administrative proceedings and white-collar crime cases. Experienced in restructuring and insolvency and insurance-related disputes, as well as commercial issues. Oliver Nääs enters the rankings in recognition of his strong market presence. Commentators recognise him as “one of the most renowned” criminal disputes lawyers, who is active in “high-profile white-collar crime” mandates.

On 9 November 2017, amendments to the “Law on the Prevention of Money Laundering and Terrorism Financing” have entered into force. The main purpose of amendments is to prevent money laundering and terrorism financing and provide a free access to a correct, actual information on the true beneficial owners of legal entities. Consequently, the amendments provide an obligation for all legal entities, registered in the Register of Enterprises, to provide the information on their beneficial owners.

New regulation on registration of true beneficial owners

The amendments provide that the true beneficial owner of the legal entity is a natural person:

• who owns, or who directly or indirectly controls at least 25 per cent of the legal entity capital shares or stocks with voting rights, or;
• who directly or indirectly controls the legal entity in any other way.

We would like to draw your attention to the fact that each situation is individual and provided border of the 25 per cent is the minimal border, which requires the identification of the true beneficial owner. Whereas the total amount of participation is less than 25 per cent, it has to be evaluated whether there is another way to identify natural persons who actually control the legal entity according to the real situation (for example, concluded contracts, other mechanism of control).

New disclosure obligations

New disclosure obligations applies to legal entities, registered in the Register of Enterprises, including, but not limited to, general partnerships, foundations, co-operative societies, limited partnerships, trade unions, limited liability companies, association of trade unions, joint stock companies, permanent trade unions, associations of political parties, European companies.

Amendments provide only two exclusions from the obligation to provide information on the beneficial owner:

• if information about the true beneficial owner has already been submitted to the Register of Enterprises according to other laws and the way how the control is performed rises from the status of the shareholder, owner, founder or member of the management board;
• if the beneficial owner is a stockholder in a joint-stock company, stocks of which have been introduced to regulated market and the way how the control is performed rises from the status of stockholder.

We would like to note that there is an obligation to submit information on true beneficial owners to the Register of Enterprises before 1 March 2018. However, in any case, if legal entity submits an application to the Register of Enterprises before 01.03.2018, for registration (foundation) of a legal entity, or changes in composition of shareholders or management board, it shall be provided the information on the beneficial owners.

It is very important to remember that currently both administrative and criminal liability is applicable for such violations. In accordance with Section 166³ of the Latvian Administrative Violations Code, failure to submit the information or documents specified by regulatory enactments on time to the Register of Enterprises, will result in a warning or a fine for an amount from EUR 70 up to EUR 430. If the same violations occur within a year after the imposition of an administrative punishment a new fine shall be imposed for an amount from EUR 210 up to EUR 700.

According to Section 272 of the Criminal law, for failure to submit information stipulated by the law or for submission of knowingly false information, sanction goes from a fine to short-term detention, or community works.

Furthermore, regarding commercial legal entities, the management board may be held liable for failure to provide the information about the true beneficial owners, if the company will suffer damages as a result of the violation, and if the management board could not be able to prove that it acted as a good and proper owner