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No borrowing for beneficial ownership delinquents, says COJ head

Shellie Leon, acting CEO of the Companies Office of Jamaica, says recent amendments to the Companies Act have introduced fines which penalise companies that fail to make an annual return for beneficial owners or report changes mandated by the law.

Penalties range from the mandatory buyback of shares from delinquent controlling shareholders who have failed to provide information, the freezing of shares, being struck off the register of the COJ, and fines running from $1 million to $5 million.

The adjustments, passed in 2023, also imposes fines and/or imprisonment of the delinquent company’s responsible officers. Fines for individuals are capped at $3 million.

Leon also said as one of the new penalties delinquent companies are not allowed to borrow, and so banks should check if clients are compliant before they issue loans, she warned, while addressing the annual JBA-JIFS Anti-Money Laundering/Counter Financing of Terrorism, or AML-CFT, conference hosted by the Jamaica Bankers Association and its affiliate, the Jamaica Institute of Financial Services.

The more stringent requirements for disclosure of beneficial ownership is in compliance with the requirements of the global Financial Action Task Force, one of a series of measures Jamaica has been told to address in order to get off the task force’s ‘grey list’.

“What is the cost of not changing? It’s very high,” Leon declared of the greylisting and its impact on the country’s cross-border transactions.

“We purchase goods online. What if we could not because no one wanted to accept our cards, because we are doing a transaction from Jamaica? What if financial entities decide to de-risk by doing no business with corporate Jamaica?” she said.

The concept of ‘legal persons’ or ‘artificial persons’ was created so that the operators of businesses could feel free to innovate without a noose around their necks, or losing personal assets, but that has led to some using the system – referred to as the corporate veil – as a cover to commit crimes, the Companies Office official said.

“The court looks behind the corporate veil and holds persons responsible. Anti-money laundering/counter-terrorism financing looks behind the veil. Beneficial ownership registration and ascertaining who is a beneficial owner ensures corporate transparency and prevents the misuse of legal persons,” she added.

“From research, it is evident companies and other legal vehicles can be used to commit financial crimes, which can lead to losses.”

However, Leon also noted that in Jamaica’s case, the instances of abuse were relatively confined.

Risk profiling done by the Companies Office shows that for 96 per cent of the registered entities, beneficial owners and legal owners were one and the same. “Only a small percentage are high risk,” she said.

Nevertheless, she added, the Companies Office takes steps to verify who really controls a company, to ensure the information complies with the declarations of the company.

That schedule includes information collection, office visits and inspections, depending on the considered risk profile.

“We look at ownership and we look at control, either together or separately. We look at who are shareholders or members. The 2023 amendments deal with non-profit entities as well,” said Leon.

“Owner refers not only to rights in property, but to who is behind the company or controlling it. We are looking at managers and parties not named, but who may be controlling [the business],” she added, noting that control may issue from an agreement, or relate to a financial backer, or may emanate from the terms and conditions of loans to the business.

In ascertaining control, the agency also looks beyond the size of share ownership and towards indicators and agreements that reduces or affects voting rights.

Information required for beneficial owners include name, address, nationality, date of birth, taxpayer registration number or passport and driver’s licence number. Submission of such documentation has now become a requirement.

“We need to collect them, because we need to be part of the fight [against] financial crimes. This is an international effort. We need to have mechanisms in place which cause us to cooperate both nationally and internationally,” said Leon.

“Gone are the days when we just accept information; we actually verify,” she said.

But with over 70,000 companies on the register, the deep process is confined to a discrete block.

“We don’t go to the over 70,000 on register. For high-risk companies, we visit biannually, send questionnaires for completion, or we go in for inspections. It all depends on the level of risk, based on set criteria.”

As part of the international fight, Companies Office of Jamaica shares information with competent authorities, registries and law-enforcement agencies across jurisdictions. The level of sharing about beneficial ownership is guided by the amended law.

“Every single month we get requests from certain agencies for information. This is usually to aid in investigations,” said Leon.

“Some persons are concerned that the world at large will become aware of certain things. However, those who can receive information are limited.”

The list includes certain officers in the police force, commissioners general, the director of public prosecutions, and financial institutions, “which, with the consent of their customers, can verify beneficial ownership information; and certain non-financial entities, such as attorneys and accountants, who can only access if clients give written consent”, said Leon.

As to the powers held by the Companies Office, it can compel the filing of the information via the courts and request information from the public to verify beneficial ownership information.

Additionally, a company is obligated to keep the record current up to seven years after it is struck off the register or wound up.

“The registrar is obliged to ensure that what is filed is up to date. But there are also obligations on the companies to keep membership and beneficial ownership information in the register of information. They are obliged to keep documents of the company for seven years after the company is struck off or wound up,” said Leon.

When a company’s owners change, the Companies Office is to be notified within 14 days.

Each newly registered company is expected to disclose their beneficial ownership, and all registrants are required to include the information on each annual return.

A company can be struck from the register for failing to comply.

“A company shall be struck from the register of it fails to rectify the register after a conviction, or if there is missing beneficial ownership information, or it fails to deliver an annual beneficial ownership return,” said Leon.

“Where a company has not filed an annual beneficial return or the information is inadequate, the company may not be able to exercise their power to borrow.”

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