Filing discrepancy reports and validity of discrepancy notation
Credit institutions have an
obligation under law to verify that new and existing clients have information
on their beneficial owner on file with the Commercial Register, as well as the
obligation to submit a discrepancy report in case of any inaccuracy in
A discrepancy report does not need to be submitted in a situation where an obliged entity has not filed any data at all about their beneficial owner to the Commercial Register.
Banks are obliged to notify the Commercial Register of discrepancies in beneficial ownership using the separate beneficial ownership database, the data controller of which is the Ministry of Finance.
The purpose of this document is to provide an overview of known problems and to arrive at common positions between banks to overcome difficulties of interpretation. The general goal is to ensure uniform practice for submitting discrepancy reports and interpreting discrepancy notations, ensuring compliance with the obligation to submit discrepancy reports and avoiding unfounded negative impact for bank clients.
In technical questions arising in regard to discrepancy reports, the Centre of Registers and Information Systems (RIK) should be contacted.
Submission of discrepancy reports
Both upon establishing a new business relationship and when applying diligence measures within an existing relationship, banks must verify beneficial ownership data and identify any discrepancy between actual beneficial owners and the beneficial owners declared by the client to the bank and submitted to the beneficial ownership database.
The Commercial Register’s XML service can be used to query data. There is a lack of an integrated data transmission platform for sending in discrepancies and thus the discrepancy report must be submitted to the database using the online site. Nor is the platform necessary for sending in the discrepancies described in the TEKSA project documentation. Integrated data transmission to the Commercial Register is, at the present time, one-way only, meaning that data on beneficial ownership can only be queried from the Commercial Register. The Register can be entered for the purpose of filing a discrepancy report only via a personal identification code based authentication tool.
The obligation to submit discrepancy reports arises in a situation where an obliged entity applies diligence measures and identifies a discrepancy in the beneficial ownership data submitted by or concerning a beneficial owner or data gathered at its own initiative and submitted to the beneficial ownership database, above all if there is a doubt in the accuracy of beneficial ownership data.
Should a discrepancy come up in the course of applying diligence, including when updating data, the first thing to be done is to make sure that there is a discrepancy by analysing and checking the data at the bank. The data should then be corrected and the following submitted to the client:
1) a notification/request to check beneficial ownership data. The notification communicates to the client that there may be a discrepancy, and provides an opportunity to clarify why the data do not match, and proposes to the client that they correct/update their data in the Commercial Register as well as in the bank, and also notifies the client of the amendments that have entered into force obliging the bank to check the conformity of information on beneficial owners to the data filed with the Commercial Register and, should there be a discrepancy, file a discrepancy report to the Commercial Register. It is also good practice to notify the client about the fact that the TEKSA database has been established and the purpose of identifying discrepancies, providing a reference to the information posted in the Commercial Register.
2) Reminder(s), if the bank has not been sent an explanation and data changed, or if an explanation has been sent to the bank but the data have not changed or the data have been changed but the discrepancy has not been eliminated.
Among other things, the reminder draws attention to the fact that the bank is obliged to notify the Commercial Register of discrepancies, if the client has not brought data into conformity by the deadline and the Commercial Register registrar is notified of the right to make a notation into the public register that there is a suspicion regarding accuracy of beneficial ownership data for the [company name] and notifies of a prohibition, arising from Money Laundering and Terrorist Financing Prevention Act, on establishing a business relationship or completing transactions if it is not possible for the obliged entity to determine its client's beneficial owners.
3) Notification if the Commercial Register data have not been changed. The purpose of the notification to alert the client that the bank has notified the Commercial Register of a discrepancy/submission of a discrepancy report.
If, after all conceivable methods have been exhausted, the discrepancy cannot be eliminated and the client has not updated the data after a reminder was sent, an additional term was granted and a reasonable time has elapsed, the bank shall, within 3 business days, file a discrepancy report to the Commercial Register accompanied by data and documents indicating the discrepancy. The basis for disclosure of data and documents is provided by the Credit Institutions Act.
A reasonable term from identification of a discrepancy in beneficial ownership to elimination of the discrepancy is 30 days. By that time, the assumption is that the bank has done all it can for the company to correct its data and eliminate the discrepancy. In this manner, we reduce significantly the potential harm to the client’s reputation. In justified cases, the reasonable term may be longer.
Since the register has no obligation to provide a reason for not making a discrepancy notation, the bank can itself turn to the register in the case of questions related to the proceedings on the discrepancy report and ask the register to provide a reason for not making a discrepancy notation.
Retention of data: Information on procedures performed to identify the beneficial owner, including verification data from identification of discrepancies, must be retained for 5 years and for an additional 5 years on the basis of precept from a competent supervisory authority.
Filing a discrepancy report in case of suspicion of money laundering or terrorist financing
In cases set forth in subsection 49 (1) of the Money Laundering and Terrorist Financing Prevention Act, if there is a suspicion of money laundering or terrorist financing, it is not necessary, in a situation involving the filing of a discrepancy report, to wait for consent from the Financial Intelligence Unit for filing a discrepancy report. The FIU is considering a change to the FIU report form where an additional field will be added in which it must be noted whether a discrepancy report has been filed. The FIU may, in cases and in accordance with procedure set forth in the Money Laundering and Terrorist Financing Prevention Act, prohibit a person to file a discrepancy report if doing so may contravene the principle of secrecy of messages.
Verifying discrepancy notations. Validity of discrepancy notations
The bank must verify a discrepancy notation filed with the beneficial ownership database (whether the notation is valid or deleted) when it applies diligence measures in respect to a person.
The beneficial ownership database data have an informational significance, meaning that in identifying discrepancy notations, the bank must assess whether there are grounds for application of enhanced diligence measures (e.g. under clause 36(2) 1) of the Money Laundering and Terrorist Financing Prevention Act).
If there is no suspicion of an elevated risk of money laundering or terrorist financing (the counterparty does not conceal anything or lie but has merely neglected to update data or has been negligent) the bank shall apply enhanced diligence as long as there are other grounds for applying enhanced diligence.
The AML Bridge platform in Salv is also available for potential exchange of information related to discrepancy notations, if one is identified. Exchange of discrepancy reports related information via SALV can take place for the purpose of AML and terrorism financing countermeasures and compliance with international sanctions in a situation where it is desired to notify the counterparty bank of the transaction or client of suspicious transactions, circumstances or clients, to gather information necessary for fulfilling diligence measures or verifying a suspicion, including if the suspicion also indicates discrepancy of the beneficial ownership data.
A discrepancy report is not filed:
1) about discrepancies identified in the past (the discrepancy report based on old inspections/data/document may be expired, i.e. there may be situations where data that turned out to be false in the past have become accurate due to a change in real-life circumstances).
Example: the entity obliged to file data has miscalculated holdings in the past or omitted someone from the beneficial ownership but in the meantime the proportions of the holdings have changed or someone has exited as an owner.
2) if the person’s name has changed – physically it is the same person.
A discrepancy report must be filed:
1) the client does not conceal anything or lie but has neglected to update data or has been negligent, then the discrepancy report must be filed after the client has failed to correct/update the beneficial ownership data in spite of the proposal made by the bank.
2) The client has reported all management board and supervisory board members to Commercial Register as UBOs but has reported to the bank only the chairmen of the boards (included in the Commercial Register UBOs). If the bank understands the connection between the beneficial owners but a different size of UBOs has been reported, then, even if the discrepancies are not particularly substantive, it is considered a fundamental discrepancy and it must be reported.
3) In the case of a state-owned company, the minister has been reported to the bank, but the same individual has not been reported to the Commercial Register as a UBO.
Opinion of the Financial Intelligence Unit, 25 May 2022