There is a lot of discussion about privacy in relation to the regular UBO register, which provides insight into who the ultimate beneficial owners (UBOs) of a company and other legal entities are. Little attention has been paid to the UBO register for trusts, which came into effect on 1 November 2022. This is remarkable, because this register has the same privacy issues and also appears to be unworkable for many investment funds.
The UBO register for trusts provides insight into individuals who have a role or financial interest in trusts and similar legal constructions. A fund for joint account ("FGR") is regarded as such a similar construction. In an FGR, the most commonly used structure for investment funds in the Netherlands, the founders, managers, legal owners, custodians and investors are classified as UBOs. The problem lies with the last group. The first four groups are usually made up of a select group of individuals. However, the number of investors can potentially be infinite.
For a fund with a licence (AIFM or UCITS) the number of investors does not impose any extra burden. They can register the participants as a group when the fund is offered to at least 150 people. The Ministry of Finance decided, despite persistent lobbying, differently for managers under the AIFMD registration regime. These are the so‑called "light" managers who normally have less to fear from legislation because they apply restrictions such as a minimum subscription amount of 100,000 euros per investor. For the UBO register for trusts, however, it is expected that they will have to provide the data of all investors individually, regardless of the size of the investment or the percentage stake in the total fund assets. At the time of writing there are 107 managers under the AIFMD with a licence and a large majority, namely 711, with only a registration.
Hundreds of clicks
To illustrate the situation funds find themselves in: the UBO register for trusts requires certain personal details for each UBO, such as name, date and place of birth, nationality, residential address, email address, BSN and the size of the interest indicated in bands of 25 percent. In addition, a copy of an identity document is required for each UBO, which must meet very strict requirements. Only Dutch and foreign passports or Dutch identity cards are accepted; driving licences and foreign identity cards are not.
Moreover, the front and back of the identity document must be uploaded as a single file and only a colour copy is accepted. Finally, the BSN must be visible, while a watermark is discouraged. This naturally provokes resistance among investors because another government agency advises exactly the opposite to create a safe copy of the identity document. It is striking that there is still no work being done with technical solutions such as an API connector or bulk upload. As a result, for most funds in the Netherlands the data of all – sometimes hundreds – investors have to be registered field by field. For each investor this can amount to tens of minutes and hundreds of clicks. Enquiries at the Chamber of Commerce reveal that a bulk upload will not be possible in the short term.
Finally, changes are expected to be reported within one week. At most funds the allocation changes monthly, or sometimes even daily. Maintaining the register thus becomes a very time‑consuming and costly process, partly because the UBO register for trusts does not provide a clear overview of the current data.
Another problem is that the obligation to register and keep the UBO data up to date in the UBO register for trusts rests solely with one director of the legal owner. This individual can only log in to the UBO register trust portal via DigiD to fulfil the registration.
For the time being, no third party can be authorised, even though parties such as trust offices have access to all the necessary data and aim to relieve fund managers of their administrative burden. AssetCare, one of these trust offices, has asked the Chamber of Commerce whether authorisation will be possible in the near future. The Chamber of Commerce is consulting with the Ministry of Finance on this matter, but no decision has been made to date.
As stated in the introduction, in addition to the practical limitations of entering data, there is also uncertainty about who has access to the information. According to the Court of Justice of the European Union, a UBO register should be accessible only to parties with a legitimate interest, such as the competent authorities, including the Financial Intelligence Unit (FIU) and the Authority for the Financial Markets (AFM). Consequently, the Ministry of Finance decided to close the regular UBO register, possibly temporarily, to the general public.
It has now become clear that the Court of Justice ruling also affects the UBO register for trusts. According to the register's website, the data — apart from the BSN and the identity document — were until a few days ago publicly accessible for a fee. It has now become apparent that the information is no longer available to the competent authorities, banks, other financial institutions and notaries.
As with the regular UBO register, the question is to what extent this is definitive. Moreover, there will be plenty of discussion about what exactly constitutes a legitimate interest. For investment funds in the Netherlands, all investors must be reported by 31 March 2023 at the latest. This date was initially 31 January 2023, due to a three-month transition period, but it was extended a few days before the deadline. Hopefully, this will allow enough time to introduce technical solutions in the UBO register for trusts. An alternative is to revise the rules so that funds with a registration can also register their investors as a group. Until then, the current process for funds that have to report all investors has been made virtually impossible.
