Access to Beneficial Ownership Registers in the European Union is Restricted

In November 2022, the Court of Justice of the European Union (CJEU) issued a ruling limiting public access to registers of beneficial owners of companies, citing violations of privacy rights and the protection of personal data enshrined in the EU Charter of Fundamental Rights. This decision marked a turning point in Europe’s approach to financial data transparency, significantly altering access to information about companies' ultimate owners.

Background

The idea of establishing centralized registers of beneficial ownership was first discussed during the G8 Summit in 2013. In 2015, the EU adopted the Fourth Anti-Money Laundering Directive (4AMLD), requiring member states to create such registers.

Initially, access to the registers was granted to parties with a "legitimate interest," such as investigative journalists. However, the Fifth Anti-Money Laundering Directive (5AMLD), adopted in 2018, expanded access to the general public to promote transparency and prevent the misuse of the financial system for illicit activities.

In response, many countries, including the UK, began establishing open registers to enhance transparency and deter financial crimes. By 2019, several EU countries had made their registers publicly accessible, enabling journalists and civil society organizations to monitor financial flows and uncover corruption effectively.

The CJEU Ruling and Its Implications

On November 22, 2022, the CJEU ruled that granting unrestricted public access to beneficial ownership registers infringes fundamental rights to privacy and personal data protection.

In December 2022, the EU Council reached a position on the proposed Sixth Anti-Money Laundering Directive (6AMLD), reflecting the CJEU's decision. The Council emphasized that registers should remain accessible to those demonstrating a "legitimate interest" in the contained data, including journalists and civil society organizations involved in anti-money laundering and corruption prevention efforts.

Divergent Responses from EU Member States

EU member states reacted differently to the CJEU ruling:

• Malta, Cyprus, Luxembourg, and the Netherlands: Fully restricted access to their registers.
• France: After initial resistance, closed its Beneficial Ownership Register to the general public in July 2024, citing compliance with the CJEU decision.
• Germany, Ireland, and Denmark: Limited access to individuals with proven legitimate interests.
• Other countries: Maintained public access to some extent.

Impact on Transparency and Financial Crime Prevention

The CJEU ruling and subsequent actions by EU member states have raised concerns among organizations combatting corruption and financial crimes.

• Challenges for Investigators: Restricted access has complicated the work of journalists, researchers, and anti-corruption organizations, making it harder to trace financial flows and expose the use of shell companies for illegal activities.
• Reduced Transparency: The lack of free access to these registers risks increasing financial crime and undermining transparency in the business world.

As debates continue, the balance between privacy rights and the need for transparency remains a contentious issue in the fight against financial crimes.

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