During the past five years, the publicly listing of the ultimate beneficial owners (hereinafter, the “UBO”) of legal entities has been highly topical within Latvia and at the European Union level since the implementation of AML directives.[1] The latter entailed the obligation for every company to report its UBO as of 2017, followed by the introduction of potential criminal liability for failing to report the UBO of a legal entity. Notably, the Court of Justice of the European Union (hereinafter, the “CJEU”) issued a ruling on 22 November 2022,[2] in which it upheld the provisions of the fifth AML Directive [3](regarding public access to UBO data) are invalid. However, the ruling did not put a stop to the practical application of the applicable UBO obligations and Member States continue to develop as well as enhance the requirements and responsibilities arising from the latest AML directives.
On 7 November 2024, the parliament of the Republic of Latvia (Saeima) adopted amendments to the Land Register Law (Zemesgrāmatu likums) (hereinafter the “Amendments”) which came into force on 1 January 2025. The Amendments introduced new transparency requirements applicable to legal persons and formalities when acquiring real estate in Latvia.
According to the explanatory notes attached to the Amendments, the changes were introduced due to the issue that “sanctions imposed under European Union legislation apply not only to property owned by a sanctioned subject but also to property held or controlled by such a subject. Consequently, […] the entry of civil law restrictions should apply not only to real estate directly owned by a sanctioned subject but also in cases where, for example, a sanctioned subject owns more than 50% of a legal entity’s shares, holds a controlling interest, or is the ultimate beneficial owner. In the absence of information on the beneficial owners of foreign-registered legal persons, it is impossible to effectively enforce sanctions”. In that regard, the Amendments provide for additional transparency and compliance with international sanctions.
Latvia is not the first Member State to introduce the obligation of transparency. In Germany, similar requirements for disclosing UBOs have been in force since December 2022.[4] While the Amendments only apply to requests for title deed transfer as of (January 2025), Germany’s applicable rules apply retroactively (i.e., to previously acquired real estate) setting a deadline for foreign legal entities to report their UBOs and to disclose all legal entities or arrangements within the chain of ownership.
If requests for a title deed transfer are entered into the Land Register by a legal person, partnership, or foreign legal entity or legal arrangement registered in the registers maintained by the Latvian Commercial Register (Uzņēmumu reģistrs), and which has registered a branch or representation in Latvia, then the legal entity is not required to submit additional information on the UBOs to the Land Register. With regard to the legal entities registered in the Commercial Register, assigned Court of First Instance judges review the applications before entered into the Land Register and also verify the UBO. Therefore, legal entities must only ensure that their respective UBO is properly registered and updated in the Commercial Register.
If requests for a title deed transfer are carried out by a by a legal entity not registered in the registers maintained by the Commercial Register, but registered in another Member State, the legal entity must attach to the application relevant information from the competent authority of that Member State concerning the registered UBO of the legal entity in question.
This information may be submitted online (where the information is publicly available in the register of the Member State concerned) and in the form of an extract as designated by the relevant competent authority.
In accordance with the Amendments, if requests for a title deed transfer are carried out by a legal entity not registered in either the registers kept by the Commercial Register or in another register of a Member State, the legal entity is obliged to submit an application to the Commercial Register for the registration of the UBO before submitting the request for the title deed transfer to the Land Register.
If the UBO information is not submitted to the Land Register or has not been duly registered in the registers at the Commercial Register, then the assigned Court of First Instance judges shall disregard the request for the title deed transfer.
However, not all Member States are subject to the obligation to disclose UBO information, therefore, not all legal entities are able to comply with the requirements of the Amendments. For example, in Italy during 2024, by way of order no. 8248/2024, the Council of State suspended a judgment on appeal by referring questions for a preliminary ruling to the CJEU, as a result of which the reporting obligation of a UBO is currently not clearly defined.
According to the explanatory notes attached to the Amendments, if in an applicable jurisdiction the competent authority is not obliged to identify UBOs, then the applicable jurisdiction should be classified as a “high-risk” jurisdiction. Consequently, if a foreign legal entity cannot attach a certificate from the competent authority concerning the request for the title deed transfer, then immovable property cannot be transferred in the legal entity’s name, unless the title deed transfer is based upon a notarial deed.
In the event of a notarial act, a sworn notary as a subject of the Law on the Prevention of Money Laundering and Terrorism and Proliferation Financing (Noziedzīgi iegūtu līdzekļu legalizācijas un terorisma un proliferācijas finansēšanas novēršanas likums) shall verify the origin of funds and the status of the legal entity carrying out a transaction, including whether or not it is the subject of sanctions. However, the text of the Amendments themselves are silent on the potential action of legal entities if the UBO information cannot be registered in the country which they are legally registered in. Until now, notaries have not encountered such cases and note there are currently no clear guidelines on how to act in such situations or what information the assigned Court of First Instance judges for the Land Register would expect from such real estate acquirers.
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[1] Please refer to Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending Regulation (EU) No 648/2012 of the European Parliament and of the Council and repealing Directive 2005/60/EC of the European Parliament and of the Council and Commission Directive 2006/70/EC (Text with EEA relevance).
[2] Please refer to the Judgment of the Court of Justice of the European Union of 22 November 2022 in Joined Cases C-37/20 and C-601/20.
[3] Please refer to Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018 amending Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, and amending Directives 2009/138/EC and 2013/36/EU (Text with EEA relevance).
[4] Please refer to Section 20(1) of the Money Laundering Act (AMLA).
April 25, 2025 by Elizabete Bartansone, Associate
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