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During the past few years, against the backdrop of the Panama and Paradise papers, awareness of money laundering, financial transparency, and corruption have prompted new and revised rules on ultimate beneficial ownership (UBO) in the European Union (EU). The EU’s Fourth Anti-Money Laundering Directive (2015) required beneficial owners registries (BORs) to be available to law enforcement agencies across the union. It also provided for access to UBO information by all “competent authorities” as a means to tackle money laundering and terrorist financing.
The Fifth Anti-Money Laundering Directive in 2018 went further and for the first time opened the BORs to the public.
However, in a surprise judgement in November 2022, the Grand Chamber of the EU Court of Justice (CJEU) ruled that a provision in the Fourth Directive which obliges member states to ensure that information on beneficial ownership is accessible to the general public is invalid (Joined Cases C-37/20 and C-60/20).
The case was brought by a Luxembourg company and its beneficial owner against the administrator of the country’s beneficial ownership register. The Luxembourg courts referred questions to the CJEU regarding the compatibility of the Directive with the Charter of Fundamental Rights of the EU.
In its judgement, the CJEU said that “it cannot be considered that the interference with the rights guaranteed in Articles 7 and 8 of the Charter [respect for private and family life and right to the protection of personal data], which results from the general public’s access to information on beneficial ownership, is limited to what is strictly necessary.” It also found that the interference with these fundamental rights was not “proportionate”.
The CJEU’s ruling has highlighted the tension between transparency surrounding UBO information on one hand and the requirement to protect privacy on the other hand. It has also increased uncertainty around access to BORs in Europe. Reflecting this tension, following the judgement, national registries are taking various approaches to accessibility. For example, the Netherlands has shut down access to UBO information until further notice. At the opposite extreme, Denmark’s registry is still accessible to the public. Germany is taking a middle ground: its BOR is partially open, and information is available where there is a legitimate interest in obtaining it.
This patchwork approach makes finding data on UBOs challenging. It is further complicated by the lack of central regulation and the reliance on self-reporting, which means that not all data is accurate or complete.
With extensive experience in unravelling complex ownership structures to confidently identify UBOs – as well as their reputation and regulatory standing – in the EU and beyond, Risk Advisory advises businesses to seek external support when navigating the increasingly complex information environment. When answering questions about ownership for our clients, we always recommend an approach that combines extensive public records research with intelligence gathering from human sources.
Investigating UBOs in Europe is complex and it’s critical that businesses understand how to navigate the information environment to get the full picture. Relying on publicly accessible BOR data is never sufficient, especially in light of the CJEU judgement and the uncertainty that has followed it.
Risk Advisory is uniquely positioned to help clients obtain such data thanks to our market knowledge, regional expertise, and in-house language capabilities. The quality of our research is rooted in a team – located between London and Zurich – that comprises native speakers of European languages such as Dutch, Spanish, German, Luxembourgish, and French and have lived and worked in the jurisdictions they cover. This means we can confidently obtain relevant data accurately and efficiently, using a variety of tools. We understand the concerns businesses have about knowing whom exactly they are dealing with, especially in a rapidly changing regulatory environment, and we work diligently to help them get the answers they need.