TRACKING ULTIMATE BENEFICIAL OWNERSHIP

Introduction:?

The issue surrounding Ultimate Beneficial Owners (“UBO”) is seen as a matter of global concern, that allowing such UBOs to retain a cloak of anonymity enables many illegal activities, such as tax evasion, corruption, money laundering, and financing of terrorism to take place out of the view of law enforcement authorities.?In recent years, the fight against money laundering, tax evasion and terrorist financing has been progressed in an attempt to deny international businesses and entities using company structures as a front for financial fraud and terror financing activities. It is a known fact that organised crime is often hidden in a complicated form of ownership structures to mask the identity of the UBOs who could be criminals, terror organisations or indeed sanctioned parties.??

The use of offshore tax havens, investments in real estate, off the shelf shell companies, Trusts with no specific purpose, layers of shareholding (for instance, through subsidiaries or intermediaries), are means by which money laundering can take place and be concealed. Such illegal or fraudulent practices have given rise to the need for governments to implement UBO legislation which provides measures for ascertaining the ownership structure of any entity for the sake of transparency.??

The issues of identifying UBOs and improving financial transparency more broadly have become increasingly important around the world inclusive of the Sultanate of Oman.?Oman like other developed countries has taken its fight against money laundering, tax evasion and terrorist financing very seriously and has in recently introduced significant legislation to deal with such matters.

Specific Legislation?

Oman has had in place, well developed anti-money laundering legislation in the form of RD 30/2016.?For the attainment of further financial transparency and corporate accountability, the Minister of Commerce, Industry, and Investment Promotion of Oman on the 28th of December 2023 issued Ministerial Decision No. 630/2022 announcing the regulations for identifying the UBO (“The Regulations”), which came into force on the 2nd of January 2023. The Regulations are applicable to all commercial companies provided for in the Commercial Companies Law RD 18/2019 (“CCL”) with the exception the public joint stock companies, who must maintain a register of information relating to all shareholders owning 25% or more of any company at the registered head office of the company (“The Register”).?Article 4 of the CCL provides that commercial companies must adopt one of the following forms:

1. General Partnership

2. Limited Partnership

3. Joint Venture

4. Joint Stock Company (public/closed).

5. Holding Company

6. Limited Liability Company

7. Single Proprietor Company

The UBO in the Regulations is defined as any person who owns or exercises ultimate control over a commercial company directly or indirectly including any person who has control or ownership through a chain of ownership or controls other than direct control.

All commercial companies are required to adhere to the Regulations within one month from the date on which it comes into force (i.e., 2nd January 2023).?The Register would need to include, where such shareholder was an individual, information relating to the individual including full name, nationality, date and place of birth, address, place of residence, details pertaining to the individual’s employer and the number of shares being held by the UBO.?A copy of the individual’s current passport or ID card would also be required to be retained.?Where the shareholder was a corporate entity, the Register would need to include the name, legal status, and constitutive documents of the corporate entity, the address of the head office (or the main place of work if the legal body is a foreign) and details of the corporate entity’s legal representative in the Sultanate of Oman.?The Register would also need to include the passport/ID cards of the executive management of the corporate entity.

The Regulations also require a resident in the Sultanate of Oman to submit all the information of shareholders/UBOs to the Ministry of Commerce, Industry, and Investment Promotion (“MOCIIP”) and to register this in the commercial register.?Any changes required to the information contained in the Register must be made within a maximum of five (5) business days from the date on which the company becomes aware of such change.?The information can also be kept electronically and provided to the MOCIIP within three business days of a request by the MOCIIP.??Failure to adhere to or violate any of the provisions of the Regulations may result in either a written notice being given by the MOCIIP, an administrative fine not exceeding RO 1,000 (Rials Omani one thousand) or the suspension of the corporate entity from the commercial register for a period of not more than three (3) months.

Regional Endeavours

The Regulations adopted by Oman are part of a growing trend in the Middle East where many of its neighbours have adopted similar UBO legislation or are in the process of doing so, striving for greater financial transparency.?The first country in the Middle East to adopt such legislation was Qatar who, on the 8th of January 2020 passed Law 1 of 2020 related to the Unified Economic Register, and Executive regulation issued by the Council of Ministers number 12 of 2020 issued on the 27th of April 2020 were implemented requiring applicants submitting a request for a new, renewed or updated commercial registration to provide details of the UBO for such entity.

On the 22nd of July 2020, the Bahrain Ministry of Industry, Commerce and Tourism passed Resolution Number (83) of 2020 concerning the Standards, Requirements and Rules to Determine the Ultimate Beneficiaries with the aim of prescribing rules and guidelines for determining who falls under the definition of an UBO.?The definition of a UBO is much wider than the definitions in the Regulations and in the UAE legislation.??

The United Arab Emirates followed shortly thereafter with the Cabinet, upon the approval of the Minister of Economy, issuing Cabinet Decision No. (58) of 2020 on the 224th of August 2020 Regulating the Beneficial Owner Procedures (“Cabinet Decision 58-2020”) followed by Cabinet Decision No. (16) of 2021 issued on the 31st of January 2021 regarding the Unified List of the Violations and Administrative Fines for the Said Violations of Measures to Combat Money Laundering and Terrorism Financing and Cabinet Resolution No. (53) of 2021 issued on the 23rd of May 2021 Concerning the Administrative Penalties against Violators of The Provisions of the Cabinet Decision No. (58).??The Regulations are similar to the provisions that have declared under Cabinet Decision 58-2020.

The Kuwaiti Ministry of Commerce and Industry has only just issued MOCI Decision 4 of 2023 on the 4th of January 2023 which will come into force on the 1st of April 2023.?The definition of an UBO is much wider than the definitions in the Regulations and the UAE legislation and similar to legislation passed in Bahrain and Kuwait.

At present, Saudi Arabia has no specific legislation as yet concerning UBO to ensure that competent authorities are able to access beneficial ownership information of legal entities and arrangements operating in Saudi Arabia.??

?Author details

Faiz Khan

Consultant

Corporate/Commercial

Al Busaidy, Mansoor Jamal & Co

Tel: +968 24829200

Email: [email protected]