On 22 November 2022, the Court of Justice of the European Union (CJEU) declaredi that the provision of the EU Anti-Money Laundering Directiveii (AMLD), whereby Member States must ensure that the information on the beneficial ownership of corporateiii entities incorporated within their territory is accessible in all cases to any member of the general public, is invalid.
Previously, the register of beneficial ownership was accessible by a competent authority, a financial intelligence unit, obliged entitiesiv and a person or organisation that demonstrates a legitimate interest.v In 2020 the final category, i.e., a “person or organisation that demonstrates a legitimate interest” was expanded to “a member of the public.”
The CJEU Judgment
The CJEU stated that:
“a fair balance should be sought in particular between the general public interest in the prevention of money laundering …and the data subjects’ fundamental rights.”
The CJEU decided that:
“the general public’s access to information on beneficial ownership…constitutes an interference with the rights guaranteed in Articles 7 and 8 of the Charter [of Fundamental Rights of the European Union].” vi
As a result of the CJEU ruling, a number of EU registers of beneficial ownership have since stopped general access to the public.
A number of the British Overseas Territoriesvii and Crown Dependenciesviii had given qualified commitments to the introduction of public registers of beneficial ownership.ix
As Anthony Travers OBE eloquently stated in this publicationx in December 2022:
“The provisions of Article 7 and 8 of the EU Charter of Fundamental Rights, which grant a right of respect for everyone’s private and family life and their correspondence and which are specifically regarded as paramount by the ECJ decision, are mirrored in current UK law in Article 8 of the Human Rights Act 1998 and as importantly in the Cayman Island Constitution in s.9 of its Bill of Rights.”
Similarly, article 19(1) of the British Virgin Islands constitutionxi states:
“Every person has the right to respect for his or her private and family life, his or her home and his or her correspondence, including business and professional communication.”
For a detailed analysis of this area see the detailed report from 2019 by the Islands Rights Initiative.xii
Thus, following the CJEU ruling, the Cayman Islands issued a statementxiii on 30 November 2022:
“The Ministry, with the assistance of external counsel, is currently reviewing the ECJ judgment to determine if there are any implications with respect to the proposal to introduce public beneficial ownership registers.”
Furthermore, on 22 December 2022, the Crown Dependencies issued a statementxiv that contained the following:
“However, in light of this CJEU judgment, implementation of [public beneficial ownership register] legislation will be delayed for a short period to enable consideration of its impact and obtain specialist legal advice…
“In respect of extending access beyond obliged entities, we intend to obtain expert legal advice on all relevant issues and, in due course, intend to review the public commitment in line with that advice and any recent development of international best practice.”
Thus, as far as the European Union Member States, British Overseas Territories and the Crown Dependencies are concerned, the adoption and operation of fully accessible registers of beneficial ownership have come to a halt.xv
It is also useful to point out that Gibraltar implemented the provisions of AMLD in both 2017 and 2020xvi, so it has a fully accessible beneficial ownership register.xvii It remains to be seen what will happen in Gibraltar and to the United Kingdom’s “Persons of Significant Control” register (which is unrestricted).xviii
“Restricted Access” Registers
However, “restricted access” registers of beneficial ownership are here to stay, and more and more jurisdictions are looking at introducing relevant legislation to this effect.xix
“Restricted access” registers are the true extent of “international standards” expected by the global community. Even the United States – not usually first in the queue to adopt international standards of this type – has introduced the Corporate Transparency Act.xx The proposed rules regarding access to and protection of beneficial ownership information were published on 16 December 2022xxi – the information may only be disclosed to federal agencies, foreign governments and financial institutions.
The Financial Action Task Force (FATF) issued the first standards on beneficial ownership in 2003 – focusing on the legal requirements for financial institutions and other gatekeepers.xxii
In 2012, these standards were strengthened to ensure that information was available and in 2014 the FATF issued a paper called “Guidance on Transparency and Beneficial Ownership”.xxiii In 2014, FATF Recommendation 24xxiv required basic information on companies to be obtained and recorded and to be publicly available. Countries were required to ensure “adequate, accurate and timely information on the beneficial ownership of all legal persons, and that their authorities can access this information in a timely manner.”
In 2014 the Guidance stated that “Basic information on the company [be] publicly available, [beneficial ownership] information could also be made publicly available or available to financial institutions and DNFBPs.”xxv In 2022, Recommendation 24 was revised but there is still not a requirement for a public register of beneficial ownership. Basic company information should be public.xxvi
An interesting reflection of this can be found in Hong Kong. In January 2017, the Financial Services and the Treasury Bureau launched a consultationxxvii proposing “to require companies incorporated in Hong Kong to obtain and hold up-to-date beneficial ownership information for public inspection upon request.”
Following the consultation conclusions in April 2017xxviii, there was a notable shift: “Having regard to privacy considerations, international practices and the FATF recommendation, we agree that access to PSC [people with significant control] registers should be restricted to the competent authorities only.”
Interest vs Interference
The salient issue therefore is: what is the line between a “legitimate interest” and undue “interference”? Much discussion has been made on “legitimate interest” in the context of data protection and that is outside of the scope of this piece.xxix However, it is worth noting from the Information Commissioner’s Office: “The legitimate interests of the public in general may also play a part when deciding whether the legitimate interests in the processing override the individual’s interests and rights.”
Perhaps the UK’s “Trust Registration Servicexxx” has some potential guidance in this regardxxxi:
“Requesters must demonstrate to HMRC that they have a ‘legitimate interest’ in the information they require to access. This is where the requester shows they are involved in an investigation into money laundering or terrorist financing, and the requester shows they are requesting the information in order to further an investigation into a specified suspected instance of money laundering or terrorist financing.”
However, under the current draft of the manual, there is no such “legitimate interest” requirement where the trust has “a controlling interest in an offshore company or other entity that is not a UK or EEA entity”.
To close, we should heed the words of Dr. Jay Fedorak, the then Information Commissioner of Jersey who stated in a balanced piece in 2019: “…we should not casually discard privacy in for speculative objectives. We should treat personal data like a valuable financial asset. We should exchange privacy only where a thorough cost-benefit analysis indicates that what we will receive is worth the loss.”xxxii
Further developments are expected.
[i] Joined Cases C-37/20.
[ii] Directive 2015/849 (i.e. the 4th AML Directive), as amended by the Directive 2018/84 (i.e. the 5th AML Directive).
[iii] And other legal entities.
[iv] Basically, legal and natural persons caught by AMLD.
[v] Not defined.
[vi] https://www.europarl.europa.eu/charter/pdf/text_en.pdf
[vii] Those with companies that would be caught by such register.
[viii] Jersey, Guernsey and Isle of Man.
[ix] See for example https://www.cigouk.ky/statement-on-beneficial-ownership/
[x] https://www.ifcreview.com/articles/2022/december/beneficial-ownership-registers-an-outbreak-of-common-sense/
[xi] https://bvi.gov.vg/sites/default/files/constitution.pdf
[xii] https://islandrights.org/wp-content/uploads/2019/06/Updated-mapping-document-on-UK-constitutional-responsibilities-for-human-rights-in-CDOTS-June-2019.pdf
[xiii] https://www.mfs.ky/news/statement-on-eu-court-of-justice-ruling-on-business-registers/
[xiv] https://www.gov.im/news/2022/dec/22/joint-statement-crown-dependencies-on-access-to-registers-of-beneficial-ownership-of-companies/
[xv] For a detailed analysis on the Cayman Islands, see Travers above at 10.
[xvi] https://www.gibraltarlaws.gov.gi/legislations/proceeds-of-crime-act-2015-amendment-regulations-2020-5292
[xvii] See https://uboregister.egov.gi/
[xviii] See https://www.gov.uk/guidance/people-with-significant-control-pscs
[xix] See for example Switzerland: https://www.admin.ch/gov/en/start/documentation/media-releases.msg-id-90662.html
[xx] https://www.fincen.gov/boi
[xxi] See Federal Register Vol. 87 No 241 Friday December 16, 2022 at pp77404-77457.
[xxii] See FATF Report to the G20 on Beneficial Ownership setting out the background. https://www.fatf-gafi.org/publications/fatfrecommendations/documents/report-g20-beneficial-ownership-2016.html#:~:text=7%20October%202016%20-%20The%20Financial%20Action%20Task,misuse%20of%20companies%2C%20trusts%2C%20and%20other%20corporate%20vehicles.
[xxiii] https://www.fatf-gafi.org/publications/fatfrecommendations/documents/transparency-and-beneficial-ownership.html
[xxiv] Since revised.
[xxv] Designated Non-Financial Businesses and Professions.
[xxvi] This is one of the factors behind the BVI allowing limited disclosure of current directors from 1 January 2023.
[xxvii] https://www.fstb.gov.hk/fsb/aml/en/info-pub-press/consult_etbo_e.pdf
[xxviii] https://www.fstb.gov.hk/fsb/aml/en/info-pub-press/conclu_eaml_etbo_e.pdf
[xxix] See for example https://ico.org.uk/for-organisations/guide-to-data-protection/guide-to-the-general-data-protection-regulation-gdpr/legitimate-interests/what-is-the-legitimate-interests-basis/#what_counts
[xxx] https://www.gov.uk/guidance/ask-hmrc-for-information-about-a-trust
[xxxi] See TRSM60020.
[xxxii] https://jerseyoic.org/news-articles/news/data-privacy-transparency-and-public-registers-of-beneficial-ownership/
