UBO / Ultimate Beneficial Owner in Poland

Most entrepreneurs and ordinary citizens have encountered the abbreviation AML in their lives, for example when visiting a bank or other financial institution to open a bank account.

Anti Money Laundering (AML) is a set of activities carried out both at the national and supra-national level, the aim of which is to combat money laundering, i.e. introducing funds from illegal sources, e.g. smuggling or drug trafficking, into legal circulation.

The history of attempts to combat money laundering dates back to the 1920s. The low effectiveness and lack of coordination of the activities of individual countries in this area made the authorities of EU Member States aware of the need to introduce international regulations. For this purpose, in 1989, during the G7 summit, the Financial Action Task Force on Money Laundering (FATF) was established – a unit for counteracting money laundering. Since 2001, this organization has also been involved in counteracting the financing of terrorism.

The first AML directive at the EU level entered into force in 1991, and today the fifth directive in this regard is already in force. Since March 2018, the Act on counteracting money laundering and terrorism financing (Polish AML Act), implementing the provisions of EU directives into the Polish legal order, has been in force in Poland. The purpose of its creation was to adapt Polish legislation to the European AML IV directive.

Legal Framework – UBO and CRBR

One of the objectives of the AML IV Directive (fourth AML directive), enacted in 2015, is the need for individual Member States and the European Union as a whole to identify, understand and mitigate its (the Union’s) money laundering and terrorist financing risks.

The AML IV Directive develops this principle by imposing obligations to assess the risks of money laundering and terrorist financing on so-called obliged institutions, i.e. professional entities (financial institutions, insurance companies, notaries, barristers at law, attorneys at law, tax advisors, etc.) with adequate knowledge, experience and organisational and financial capacity to apply enhanced financial security measures and other enhanced standards in the provision of services and thereby mitigate the risks described in the AML IV Directive.

In addition, under the provisions of the AML IV Directive, the EU Member States are required to ensure that corporate and other legal entities on their territory will have received and will hold adequate, accurate and up-to-date information on their ultimate beneficial owners (UBOs), including details of the relationships between them and their UBOs. To this end, the Central Register of Beneficial Owners (Centralny Rejestr Beneficjentów Rzeczywistych – CRBR) has been established in Poland, and the legal entities and entities without legal personality listed in the Polish AML Act have been required to report and update information on their UBOs.

The EU directives, as legal acts of the European Union, are specific in nature and are binding on the EU Member States to which they are addressed as regards the result to be achieved, but leave the national authorities of the EU Member State free to choose the form and legal means. Directives, therefore, must be implemented into the legal order of the Member States in order to speak of the legal effect they are intended to achieve.

The Polish AML Act is the implementation of the AML IV Directive into the Polish legal order. This means that the implementation of obligations in respect of counteracting money laundering and terrorist financing by the entities identified in the AML Act should take place on the basis of the Polish provisions.

Who is obliged to identify UBO?

Pursuant to Article 58 of the AML Act, the following are obliged to report and update any information on UBOs:

• general partnerships (spółka jawna);
• limited partnerships (spółka komandytowa);
• limited joint-stock partnerships (spółka komandytowo-akcyjna);
• limited liability companies (spółka z ograniczoną odpowiedzialnością);
• simple joint-stock companies (prosta spółka akcyjna);
• joint-stock companies (spółka akcyjna), with the exception of public companies within the meaning of the Polish Act of 29 July 2005 on Public Offering, Conditions Governing the Introduction of Financial Instruments to Organised Trading and Public Companies (Journal of Laws of 2022, Item 2554);
• trusts (trust) whose trustees or persons in equivalent positions:
  • have their domicile or place of residence on the territory of the Republic of Poland; or
  • establish business relations or acquire real estate on the territory of the Republic of Poland in the name or on behalf of the trust;

• professional partnerships (spółka partnerska);
• European economic interest groupings (europejskie zgrupowanie interesów gospodarczych);
• European companies (spółka europejska);
• cooperatives (spółdzielnia);
• European cooperatives (spółdzielnia europejska);
• associations (stowarzyszenia) subject to registration in the National Court Register;
• foundations (fundacja).

UBO reporting shall be performed within 7 days since entity / company registration in Poland.

In order to verify the UBO, obligated institutions may require the client to provide the relevant documentation (usually – excerpts from the companies registers, contracts, corporate structures, shareholders’ lists, etc.). If the client fails to provide the documentation, the obligated institution has to refuse to establish business relations with the client (refuse to conclude a contract or provide a service). However, if discrepancies are noticed between the data reported to the CRBR and the documents presented, obligated institutions are obliged to report these discrepancies to the Ministry of Finance.

The inability to identify the UBO(s) may also result in the freezing of the client’s bank accounts, and in the event of incorrect determination of the actual beneficiary, the obligated institution is at risk of, among others, a fine of up to PLN 1 million or criminal liability for its managing bodies’ members.

Who is a client?

Before proceeding to determine the UBO of an entity, it is first necessary to determine which entity is considered a client within the meaning of the AML Act, as the reporting of UBO data to the CRBR is always made in relation to a specific entity (client), i.e. a natural person, a legal person or an entity without legal personality. The criteria for determining the person who is the UBO are applied to the client and not to the other entities included in its structure.

Pursuant to Article 2(2)(10) of the Polish AML Act, client is defined as a natural person, a legal person or an organisational unit without legal personality to whom an obliged institution provides services or for whom it performs activities falling within the scope of its professional activity, including with whom an obliged institution establishes a business relationship, or on whose instructions it carries out an occasional transaction, whereby in the case of an insurance contract, the client of an obliged institution is understood as the policyholder, and in the case of a contract for keeping the shareholder register referred to in Article 300³² and Article 328² of the Polish Commercial Companies Code Act of 15 September 2000 (Journal of Laws of 2022, Items 1467, 1488, 2280 and 2436), the client of the obliged institution is defined as only the shareholder, pledgee or usufractory of shares subject to entry in that register in connection with the transaction giving rise to the entry.

UBO in different organizations

(a) UBO in the company

In the case of company the ultimate beneficial owners shall be:

• a natural person who is a shareholder holding more than 25% of the total number of shares in that legal person,
• a natural person holding more than 25% of the total voting rights in that legal person’s governing body, including as a pledgee or usufructuary or under agreements with other persons entitled to vote,
• a natural person controlling a legal person or legal persons who together hold more than 25% of the total shares in that legal person or who together hold more than 25% of the total votes in that legal person’s governing body, including as a pledgee or usufructuary or under agreements with other persons entitled to vote,
• a natural person exercising control over a legal person through holding powers referred to in Article 3(1)(37) of the Polish Accounting Act of 29 September 1994 (Journal of Laws of 2023, Items 120 and 295), or
• a natural person holding a senior management position in the event of a documented impossibility of establishing or doubts as to the identity of the natural persons referred to in the first to fourth indent and where no suspicion of money laundering or terrorist financing is established,

(b) UBO in the trust

In the case of a trust the ultimate beneficial owners shall be:

• the founder, including the founder within the meaning of the Polish Family Foundation Act of 26 January 2023 (Journal of Laws, Item 326),
• a trustee, including a member of the board of trustees within the meaning of the Polish Family Foundation Act of 26 January 2023,
• a supervisor, if one has been appointed, including a member of the supervisory board within the meaning of the Polish Family Foundation Act of 26 January 2023,
• a beneficiary, including a beneficiary within the meaning of the Polish Family Foundation Act of 26 January 2023 or, where the natural persons benefiting from the trust in question have not yet been identified, a group of persons in whose main interest the trust was established or operates,
• another person exercising control over the trust,
• another natural person with powers or duties equivalent to those set out in the first to fifth indents,

(c) UBO in case of natural person

In the case of a natural person carrying on a business in respect of which no indication or circumstance has been found that might indicate that another natural person or natural persons controls it, such natural person is also presumed to be the beneficial owner”.

Structure of the definition of the ultimate beneficial owner

The definition of the UBO consists of two parts: a general part and a specific part.

UBO definition – general part

The general part states that the UBO is:

“…any natural person who directly or indirectly exercises control over a client through the possession of powers, which arise from legal or factual circumstances, enabling the exercise of decisive influence over actions or activities undertaken by the client, or any natural person on whose behalf a business relationship is established or an occasional transaction is carried out…”.

Thus, the UBO is always:

• a natural person, and
• a person who exercises control over the client.

The fulfilment of these two basic prerequisites already in itself proves that a person has the status of a UBO. While the first prerequisite given above (being a natural person) is quite concrete and does not require explanation, the concept of control requires a deeper analysis and will be discussed below.

UBO definition – specific part

The specific part (Letters (a), (b) and (c)) consists of legal presumptions, facilitating the determination of the UBO by identifying specific facts demonstrating that the individual has control over the client through the powers held.

If a natural person meets at least one of the criteria set out in the specific part of the definition, this means that the criteria in the general part are automatically met. However, this mechanism does not work the other way around: the UBO can only be established on the basis of the criteria indicated in the general part without falling under any of the facts described in the specific part.

It should also be added that obliged institutions are obliged to identify each of the client’s UBOs and therefore to analyse each of the prerequisites indicated in the definition of UBO, both in the general part and in the specific part. The notification to the CRBR of the client should indicate each current power of the UBO that gives them control over the client.

The concept of control over a client (general part of the definition)

In order to consider a given natural person as a UBO, it must be established that this person controls the client directly or indirectly – this is a necessary condition.

The definition of control is neither contained in the Polish AML Act nor in any other Polish legal act. However, the definition contained in the explanatory memorandum to the government draft of the Polish AML Act is commonly used:

“…control should be understood as the ability to decide on actions or activities undertaken by the client. The control may be of a legal nature, having its source in the ownership right or rights of shareholding nature, or of a factual nature amounting to informal dependence of the client on another person. In the opinion of the drafters, the proper wording of the definition of the term beneficial owner should take into account both of these ways of exercising control over the client. Therefore, the definition [of the beneficial owner – author’s note] emphasises the aspect of having powers which, taking into account all the circumstances, both of a legal and factual nature, allow it to assume that the natural person in question has the capacity to decide on actions or activities undertaken by the client.”

Control may be direct or indirect, as the purpose of the Polish AML Act is to introduce the possibility of determining the UBO at the end of the chain regardless of the complexity of the client’s corporate and ownership structure.

The powers that allow control over a client can arise from both legal and factual circumstances. Legal circumstances are usually specific legal provisions of law or provisions of contracts and agreements that provide a legal opportunity for a UBO to interfere in the client’s activities. Factual circumstances, on the other hand, are not supported by law and are informal in nature, as they are based on actually existing economic, family, personal relationships between the UBO and other persons and allow them to influence the client’s activities.

Due to the structure of the Polish AML Act’s provision defining the UBO, the mere fact of having control over a client is sufficient to consider a natural person as the UBO of a client. The criterion of control is described in the general part of the definition, so meeting this criterion in itself will be a separate basis for determining the UBO without the need to refer to the specific part of the provision. This does not mean, however, that the specific part of the definition should be completely disregarded. Indeed, the determination of the UBO is made on the basis of all the prerequisites indicated in the Polish AML Act definition.

Beneficial owner of a legal person (specific part of definition)

The specific part of the definition of UBO contains a list of legal presumptions, i.e. conditions the fulfilment of which automatically makes the fact that natural persons have the status of a UBO.

The legal presumptions where the client is a legal person, other than a person whose securities are admitted to trading on a regulated market subject to disclosure requirements under the European Union law or equivalent third-country law, are listed under Letter (a) of the provision in question as Indents 1 to 5.

More than 25% of shares

The facts described in Indents 1 and 2 relate to a situation where a natural person directly holds more than 25% of the total number of shares in a legal person or has more than 25% of the total number of votes in the governing body of that legal person. The mere fact of holding a certain number of shares or votes determines control over a client.

Ownership of votes in the governing body of a legal person, on the other hand, may also result from a pledge (UBO as a pledgee), usufruct or agreements with persons entitled to vote.

Votes

There is a legal presumption in Indent 3 that the UBO of a client is any natural person who controls a legal person or legal persons who together hold more than 25% of the total number of shares, or who together have more than 25% of the total number of votes in the governing body of that legal person, including as a pledgee or usufructuary or on the basis of agreements with other persons entitled to vote,

The verification of the client’s corporate and ownership structure against this presumption should take place in three stages.

Firstly, it is necessary to ascertain, by means of the corporate and ownership structure provided by the client, and derived from the relevant documents, the circle of all legal persons that hold the shares in the client’s share capital or the votes in the client’s governing body (if such a body exists, taking into account the client’s legal form), as well as the number of shares or votes held by each of these legal persons individually. At this stage, this identification should not be limited only to legal persons holding more than 25% of shares or votes, as the powers of natural persons held in different legal persons should be taken into account all together.

Secondly, it is necessary to determine which natural persons have control over the legal entities established in the paragraph above and what percentage of that control is. As the legislator does not provide any specific criteria on the basis of which the existence of control over these legal persons should be established, it is necessary, when analysing the structure of each legal person holding votes in the client’s governing body, to use the same presumptions as those contained in the AML Act’s definition of the UBO.

Thirdly, the rights (in the form of percentages) established as a result of the first two steps held by the same natural persons should be added up.

If it turns out that any of the natural persons collectively holds more than 25% of the above-mentioned rights in the legal person or persons, such a person is treated as a UBO under the presumption of Indent 3 of the said provision.

Control relationship

In formulating this presumption, the legislator referred to Article 3(1)(37) of the Accounting Act of 29 September 1994 (Journal of Laws 2023, Items 120 and 295), which contains another list of legal presumptions applicable to the determination of a parent entity. The legislator requires the application of the same criteria to a natural person in the event of establishing the existence or non-existence of a control relationship between the natural person and the client for the purposes of identifying the UBO.

Therefore, according to the legislator’s concept, the UBO is also a natural person who controls the client, in particular:

1. having, directly or indirectly, a majority of the total number of votes in the client’s governing body, also on the basis of agreements with other persons entitled to vote, exercising voting rights in accordance with the will of this natural person, or
2. being a shareholder of the client and entitled to manage the financial and operational policy of that client independently or through persons or units designated by it under an agreement concluded with other persons entitled to vote, having, under the company’s bylaws or articles of association, including the natural person, a majority of the total number votes in the governing body, or
3. being a shareholder of the client and entitled to appoint and dismiss the majority of members of the management, supervisory or administrative bodies of this subsidiary, or
4. being a shareholder of the client, in which more than half of the management, supervisory or administrative bodies in the previous financial year, during the current financial year and until the preparation of the financial statements for the current financial year are persons appointed to perform these functions as a result of the exercise of voting rights by the natural person in the bodies of the client, unless another entity or person has the rights in relation to the client as referred to in Letters (a), (c) or (e), or
5. being a shareholder of the client and authorized to manage the financial and operational policy of the client, on the basis of an agreement concluded with the client or the bylaws or articles of association of the client.

In order to recognize a natural person as the UBO of the client pursuant to Letter (a) above, it is sufficient for that natural person to hold, directly or indirectly, more than a half of the total number of votes (50% + 1 vote) in the client’s governing body.

The common feature of the presumptions under Letters (b) – (e) is that the natural person is a shareholder (partner, stockholder) of the client.

Inability to determine UBO

In the event of documented inability to determine or doubts as to the identity of the natural persons specified in Indents 1 – 4 and in the event of no suspicion of money laundering or terrorism financing, any natural person holding a senior management position in the client’s structure will be considered the UBO. Most often, such people will be members of the client’s management board or other management body.

The presumption referred to in Indent 5 is of an auxiliary nature, i.e. it is used in a special case when it is impossible to determine the UBO on the basis of Indents 1 – 4 or when there are doubts as to the identity of the natural persons referred to in Indents 1 – 4. At the same time, it is a manifestation of the principle that each entity subject to entry in the CRBR should have an identified UBO. There should not be a situation, although theoretically possible, in which no natural person has been identified as the UBO.

What is important, the Polish Inspector General of Financial Information (GIIF), in his Announcement No. 38 published on 14 January 2022, states:

“Only when the analysis of the client’s ownership structure leads to the conclusion that it is impossible to determine or there are doubts as to the identity of the natural persons specified in Article 2(2)(1)(a) Indent 1-4 of the AML Act – it is possible to determine a natural person holding a senior management position (in accordance with Article 2(2)(1)(a) Indent 5 of the AML Act) as the beneficial owner.”

Due to the above argumentation, it can also be stated that Indent 5 cannot be used together with the other presumption from Indents 1 – 4, but it can be used as an additional condition next to the presumption described in the general part of the definition in a situation where a natural person actually has control over the client, but does not fall under any of the circumstances described in Indents 1-4.

UBO in Trusts

With the entry into force on October 31, 2021 of the amendment to the Polish AML Act, trusts also became obliged entities, provided that their trustees or persons holding equivalent positions:

• have their place of residence or registered office in the territory of the Republic of Poland; and/or
• establish business relations or purchase real estate in the territory of the Republic of Poland on behalf of or for the benefit of a trust.

The structure of a trust is not known to Polish law, so this part of the provision applies to trusts established abroad. Within the meaning of the AML Act, a trust is any legal relationship regulated by foreign law resulting from a legal event, contract or arrangement, including a set of such events or legal actions, on the basis of which the ownership or possession of property values is transferred to the trustee for the purpose of exercising fiduciary management and making these values available to the beneficiaries of this relationship.

In the case of a trust, all of the following persons are presumed to have control over the trust, and therefore, the status of beneficiary:

• a founder, including the founder within the meaning of the Polish Act of January 26, 2023 on family foundations,
• a trustee, including a member of the management board within the meaning of the Polish Act of January 26, 2023 on family foundations,
• a supervisor, if appointed, including a member of the supervisory board within the meaning of the Polish Act of January 26, 2023 on family foundations,
• a beneficiary, including the beneficiary within the meaning of the Polish Act of 26 January 2023 on family foundations or – if the natural persons benefiting from a given trust have not yet been determined – a group of persons in whose main interest the trust was established or operates,
• other person exercising control over the trust,
• other natural person with rights or obligations equivalent to those set out in the first to fifth indents (please see above).

Due to the complicated nature of the legal structure of the trust, in particular in cases of the so-called employee trusts, determining the real beneficiary in such an entity may be a challenge. For this reason, the Minister of Finance even issued an official announcement according to which it is recommended to contact the Ministry before submit the trust application form to the CRBR IT system.

UBO and Sole entrepreneurs / UBO & JDG

The presumption resulting from letter (c) of the discussed provision, which applies to natural persons running a sole proprietorship, is quite obvious. In the case of a natural person running a business activity in respect of whom there are no indications or circumstances that may indicate that another natural person or natural persons exercise control over it, it is assumed that such a natural person is also the UBO.

In practice, when applying AML procedures to natural persons running a sole proprietorship, the obligated institutions do not encounter any problems and limit themselves to examining the entry in the CEIDG register (a register containing information on business activities conducted by natural persons) and the client’s identity document.