In recent years, the UAE has taken significant steps to enhance transparency and combat financial crimes within its business landscape. Central to these efforts is the identification and regulation of Ultimate Beneficial Owners (UBOs) of businesses operating within the UAE. Cabinet Decisions No. 109/2023 and No. 132/2023 provide important guidelines and penalties concerning the Real Beneficiary Procedures, shedding light on the concept of UBOs and their importance in the UAE business environment.
Scope and Objective of the Cabinet Decision No. 109/2023:
Cabinet Decision No. 109/2023 in the UAE aims to enhance transparency, combat financial crimes, and ensure accountability within business ownership structures. Its objectives include mitigating risks associated with illicit financial activities like money laundering and terrorism financing by identifying and regulating the Real Beneficiary. The Cabinet Decision applies to all licensed and registered business entities in the UAE, including those in non-financial free zones. It mandates the disclosure of accurate information about the Real Beneficiary to authorities such as the Registrar. Businesses must register their Real Beneficiaries and provide detailed ownership information, including any complex ownership arrangements, to comply with the Cabinet decision.
Registration and Licensing:
The Cabinet Decision authorizes the establishment and maintenance of registers containing detailed information about the Real Beneficiary for all registered businesses in the UAE. All business entities are required to disclose relevant information during the registration and licensing process, ensuring transparency and accountability in corporate ownership structures.
Determining the Beneficial Owner:
Article 5 of Cabinet Decision No. 109/2023 outlines the criteria for identifying the Beneficial Owner of a legal person. According to this provision:
- The Beneficial Owner is the person who ultimately owns or controls a legal entity, either directly or indirectly owning 25% or more of its capital, or possessing the right to vote in the entity by 25% or more. This includes ownership through a chain of control or other means, like having the authority to appoint or dismiss Directors.
- The Registrar takes into account the complexity of the legal entity’s structure when determining the Beneficial Owner.
- The Beneficial Owner can be identified through multiple legal entities or different arrangements.
- If several individuals share ownership or control over a percentage of the entity’s capital, they are all considered owners and controllers.
- If there’s no clear individual with ultimate control or if doubts arise about the controlling individual, the person exercising control through other means is seen as the Beneficial Owner.
- If no specific individual is identified, the Beneficial Owner is deemed to be the natural person serving as the Senior Management officer.
Regulatory Framework and Compliance Measures:
Cabinet Decision No. 109/2023 lays down the regulatory framework for identifying and documenting the Real Beneficiary of businesses registered in the UAE. It mandates the establishment and maintenance of registers containing detailed information about the Real Beneficiary, ensuring transparency and accountability in corporate ownership structures. According to Article 3(1) of Cabinet Decision No. 132/2023, the Registrar may suspend commercial licenses and close commercial establishments in cases of repeated violations.
Moreover, Cabinet Decision No. 132/2023 supplements these regulatory efforts by imposing administrative fines on entities found violating the Real Beneficiary Procedures outlined in Decision No. 109/2023. Administrative penalties have been established to ensure compliance, with fines ranging from AED 20,000 to AED 100,000 for various violations. For instance, failure to register details related to the usufruct of the Real Beneficiary correctly incurs a fine of AED 20,000, for repeated offenses increasing to AED 40,000. Similarly, neglecting to establish the Real Beneficiary’s Register and maintaining relevant data get fines of AED 50,000 for the initial violation, increasing to AED 100,000 for subsequent breaches. Additional penalties are imposed for various faults, such as failure to disclose complex ownership structures or provide requested data to the Registrar. These fines are associated with warnings for corrective action within specified timeframes.
Conclusion:
Cabinet Decisions No. 109/2023 and No. 132/2023 play a pivotal role in defining and regulating the concept of Real Beneficiaries and imposing penalties for non-compliance. By emphasizing the importance of identifying Ultimate Beneficial Owners, these decisions contribute to promoting transparency, accountability, and integrity in the UAE’s business environment.
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