Luxembourg has been recognised for its favourable environment for managing ultimate beneficial ownership (UBO), ranking second globally in a recent report by Mercator, a unit of Citco, a fund and corporate services provider. The report Tuesday 2 July 2024, highlighted Luxembourg’s advantageous legal framework and business-friendly policies. A UBO identifies the individuals or entities that ultimately benefit from a company.
According to the report, Luxembourg’s ranking is attributed to several factors, including the widespread use of e-signatures and e-filings, and straightforward reporting requirements for multinational companies. These features, coupled with Luxembourg’s international workforce, status as a European financial centre and solid reputation for stability, make it an attractive jurisdiction for corporate legal services.
The United Kingdom ranked first, with Luxembourg and Hong Kong following. Conversely, Brazil, Colombia and the United Arab Emirates were the most challenging due to their complex and costly paper documentation and in-person filings.
Kariem Abdellatif, head of Mercator, told Delano on 4 July, “Luxembourg’s second-place ranking in Mercator’s global index for ease of navigating ultimate beneficial ownership compliance is a testament to the nation’s standing as a key European financial hub. With an international workforce and reputation for stability, Luxembourg has long attracted multinationals across various sectors.” He added that Luxembourg’s efficient legislative process and local expertise in corporate governance have significantly streamlined UBO management. The adoption of e-signatures, straightforward reporting requirements and business-friendly policies further cement Luxembourg’s position as an efficient jurisdiction for multinationals managing corporate governance requirements, including UBO reporting.
Abdellatif emphasised the importance of UBO compliance, noting that it is a critical legal requirement, not merely a box-ticking exercise. He advised in-house legal teams to understand UBO definitions, collect and store necessary information, maintain internal registers, file timely reports and regularly review UBO data. General counsels need the appropriate tools and data to navigate the differences between countries, as UBO compliance requires a tailored approach for each jurisdiction.
The report underscored the severe consequences of UBO non-compliance, which include increased risks of financial crime, reputational damage, hefty financial penalties, loss of licence, removal from company registers and even criminal prosecution. In Luxembourg, fines for non-compliance range from €1,250 to €1.25m. These penalties can be imposed on entities that fail to gather, store or provide information on their UBOs to the UBO register.
The data in Mercator’s report covered 105 jurisdictions where UBO requirements apply, evaluating both the average time and cost to complete UBO-related tasks. The jurisdictions were scored, resulting in an indexed league table for managing UBO compliance. The data represented approximately $2.33trn in market capital, spanning major business sectors.