Accountability: Tighter compliance for banks, financial institutions

In a global effort to increase transparency of financial institutions, FATCA (Foreign Account Tax Compliance Act), CRS (common reporting standard) and country by country reporting have been enacted, among others. While transparency is important in helping identify the responsible person, most new legislation is tax and reporting-focused. Transparency does not entirely remove risk, and it follows that new legislation would not necessarily have the effect of making responsible individuals understand and appreciate risk. To this end, a number of other pieces of legislation have been put in place, which will have a significant impact on how financial institutions and licensed corporations operate. It is expected that these new legislations will go some way towards addressing the issue of accountability.

Beneficial ownership registers. From 30 June 2016, every company (with limited exceptions) and limited liability partnership (LLP) in the UK is required to establish a register for people with significant control. A person with significant control is a person that holds more than 25% of shares or voting rights in a company or an LLP, has the right to appoint or remove the majority of directors, or otherwise exercises significant influence or control.

The information required to be recorded on the register includes name, month and year of birth, nationality, and details of interests held. Following the UK regime, the Cayman Islands beneficial ownership regime came into force on 1 July 2017. The Cayman Islands regime creates a platform on which beneficial ownership information of “registrable persons” is required to be kept. In addition, an in-scope Cayman Islands entity – and that means most Cayman Islands entities that are not listed, registered or managed – is required to engage a licensed Cayman Islands corporate services provider to maintain a beneficial ownership register. The threshold requirements under the Cayman Islands regime are largely similar to the requirements under the UK regime.

Ben Yip is a member of Hong Kong Corporate Counsel Association’s (HKCCA) executive committee, and head of legal and compliance at NF Trinity Capital. HKCCA has entered into an alliance agreement with the Association of Corporate Counsel (ACC) and will be rebranded as ACC Hong Kong from 1 September 2017