Cyprus Mail
Legal View

Reflections on the EU ruling on beneficial ownership access

court
There is no appeal against the CJEU, the highest court in the EU
EU’s highest court has restricted public access

 

Dr Louisa Borg Haviaras and Elena Hadjidemetriou

Under the provisions of the Fifth Anti-Money Laundering Directive all EU member states are required to make beneficial ownership information accessible to ‘any member of the general public’.

Many countries had already set up beneficial owner registries, when the  Court of Justice of the European Union (CJEU) ruling of November 22, 2022, Joined Cases C‑37/20 and C‑601/20 invalidated the provision requiring public access, arguing that it conflicted with the EU’s right to privacy and personal data protection.

Before commenting on the CJEU ruling, it is important to clarify who a beneficial owner is and why beneficial ownership disclosure is important in fighting money laundering and corruption. A beneficial owner is the person who ultimately controls a legal entity, or gains profits from its activities. In common terms, they are often known as the ‘ultimate beneficial owner’, or ‘UBO’. As cases show, the beneficial owner might be the legal owner of a company or maybe behind the so-called ‘nominee’ shareholders or shell companies. Criminals and money launderers often use such a structure to move money around the world while keeping their names secret and as a result hide their wealth and evade detection.

Many governments around the world have taken measures to reduce the misuse and abuse of anonymous companies. In 2022, 108 countries (including Cyprus) have committed to establishing registers of beneficial ownership information and making them public while some of them have already implemented this plan. At the same time beneficial ownership transparency is supported by the Financial Action Task Force, the G7, the G20, the International Monetary Fund, the United Nations, and the World Bank and more.

Journalists who carry out relevant investigations, civil society actors, and law enforcement agencies are all in favour of it. In the light of the above, public beneficial ownership registers can help people learn who is buying what and who the people are they are doing business.

Regarding the CJEU ruling it all began when a company, Sovim SA, and a person identified as ‘WM’, applied separately not to have their beneficial ownership information included in Luxembourg’s beneficial ownership registry. Sovim’s argument was that disclosing of its ownership data would violate the right to respect for private and family life and the right to the protection of personal data. WM’s legal team argued that disclosing of his ownership information would expose WM and his family to such disproportionate risks as risk of fraud, kidnapping, blackmail, extortion, harassment and others. When their claims were denied, they appealed the decision, to a higher court to rule on what instances would exempt an entity from reporting. The Luxembourg court then turned to the CJEU the question of whether public access was compatible with the right to privacy.

Since the CJEU is the highest court in the EU, no appeal is possible. However, the court issued a clarification stating that member states should follow the provisions of the EU’s Fourth Anti-Money Laundering Directive of 2015. This means members of the public, including journalists and civil society, can access beneficial ownership registers if they have a ‘legitimate interest’ in doing so in line with what the ruling said. However, those who have a legitimate interest in accessing the data provided by the registry will have to face restrictions, for example, the need to determine which journalists and activists would be able to get access to the data.

A second example would obviously be restriction to a complete search uncovering connections and the trail of money laundering while a third would be making the name of the journalist or social group requesting the information known.

Interested parties are now waiting for the new EU legislation, the Sixth EU Anti-Money Laundering Directive, expected to be issued next year. Since July 2021, there has been a debate on how to improve to the union’s anti-money laundering framework and hopefully there will be a reflection and a response to the CJEU ruling that will provide public access with minimal registration procedures, thus reducing the above mentioned barriers.

 

 

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