Compliance Package

As from 10 November 2020, the documents required for identification and verification of beneficial owners may be submitted to the register and inspected and used by obligated parties for the purpose of fulfilling the due diligence obligations.

With the amendment to implement the 5th Money Laundering Directive, the Federal Ministry of Finance will expand the Register of Beneficial Owners into a central platform for storing the documents required to identify and verify beneficial owners. The concept of the compliance package was developed within the organisational framework of the FinTech Advisory Board set up by the Federal Minister of Finance and is a prime example of how innovations can be developed and implemented in cooperation with the relevant stakeholders. This innovation will point the way forward in terms of reducing costs for the companies concerned and increasing the effectiveness of anti-money laundering measures in this area:

  • For all legal entities obligated to report to the beneficial owners’ register, a professional party representative may in future also, on a voluntary basis, submit the documents required to verify the beneficial owners to the register (compliance package).
  • These documents may be inspected by companies subject to due diligence obligations to prevent money laundering, such as credit institutions, financial institutions, CPAs and tax advisors, lawyers and certain professionals (obligated parties). They can fulfil their obligation to identify and verify the beneficial owners of their customers on the basis of these documents in accordance with the due diligence obligations for the prevention of money laundering and terrorist financing.
  • In the future, the time-consuming process of requesting documents and sending the same can therefore be replaced by the inspection of a compliance package, which results in great cost savings and, above all, an acceleration of processes critical for companies (for example granting loans).
  • A compliance package of a superordinate legal entity (for example of the Austrian holding company of an international group or a private foundation) can be used by any number of subordinate legal entities by means of a reference, which multiplies the cost savings.
  • A compliance package can thus be used as often as required within the validity period of one year. Unless there is a change during the year, only once a year, as part of the fulfilment of the due diligence obligations of the legal entities it needs to be checked for the identification and verification of beneficial owners whether the reported beneficial owners are still current. If no changes have occurred, only that documentary evidence for which there are special requirements needs to be renewed. This concerns mainly the confirmation of the management and documents from foreign levels.
  • The introduction of a web service and a change management service will enable the Register of Beneficial Owners to be optimally integrated into digital processes, for example of credit institutions, in the future.
  • The legal entity for which a compliance package is transmitted can control the use of the documents itself by restricting a compliance package. In this case, the compliance package can be inspected only by the obligated parties specified in the report (for example the credit institutions with which a business relationship exists, the tax advisor, the auditor and the law firm of the legal entity). In addition, the inspection can be requested directly from the legal entity or its professional party representative, and can be approved or rejected electronically.

The benefits of a compliance package for legal entities

According to Article 3 I 1 and 3 of the BORA, a legal entity is obligated to determine and verify its beneficial owners annually. This verification is to be based on documentary evidence to be requested from the legal entity, kept and, if necessary, sent to obligated parties. If a foreign ownership structure exists, such documentary evidence is to be accepted by credit institutions only if they is not older than six weeks. If different obligated parties request the same documents within the course of a year, then certain foreign documents must be requested several times, as their validity will have expired. A time-consuming multiple transmission of the same documents and a request for and sometimes translation of the same foreign documents is necessary. The compliance package significantly facilitates and accelerates this process and offers the following benefits for legal entities:

  • Documentary evidence is requested once a year in the course of the identification and verification of beneficial owners and are submitted to the Register as a compliance package in the course of the report.
  • Obligated parties no longer need to request the documents directly from the legal entity, but can perform an inspection of the compliance package. This results in significant time and cost savings for the legal entity and accelerates critical processes (for example granting of loans) for the legal entity.
  • The compliance package can be made available to all subordinate legal entities by means of a reference, which multiplies the time and cost savings.
  • A complete and valid compliance package also fulfils the retention obligations with regard to documentary evidence.
  • The legal entity can control access to the documents by sending a restricted compliance package.

The benefits of a compliance package for obligated parties

Until now, in all cases where complete extended extracts from the Register of Beneficial Owners were not available, obligated parties had to request an organisational chart and the documents necessary for the verification of beneficial owners from their clients. This request is time-consuming, because first of all a request with a specification of the required documents must be sent to the client. If the client subsequently fails to submit all documents, or if the validity of foreign documents has expired, further enquiries are necessary. This process can take several weeks or months and can delay the conclusion of new products and services for customers (for example granting of loans, leasing contracts, etc.). The Compliance Package facilitates this process and now brings the following benefits for obligated parties:

  • Obligated parties can call up an extended extract and a compliance package for new business relationships or for audits of beneficial owners in the context of existing business relationships.
  • On the basis of the documentary evidence contained in a fully valid compliance package, the beneficial owners can be verified as part of the application of the risk-based approach. The process of requesting documentary evidence, which often takes several weeks, is therefore no longer necessary, and the audit can be completed in a much shorter time.
  • If not all required documentary evidence is included into a compliance package, it can be requested electronically via the BORA Management System. The professional party representative may additionally submit this documentary evidence to the Register by supplementing a compliance package.
  • Through the functionality of a change management service and a web service, the BORA can be fully integrated into the IT systems of obligated parties, for example credit institutions, and digital process flows can be implemented for new customer creation or for checking changes.
  • By the restriction of the transmission of compliance packages to professional party representatives, quality assurance of the documentary evidence transmitted is ensured. By extending the analytical capabilities of the register authority, the data quality in the register is further improved.