Anti-Money Laundering & Register of Beneficial Owners

by | Nov 24, 2022 | Anti Money Laundering, Beneficial Owners, Data Protection

EU Court of Justice held that the EU’s anti-money laundering obligation on Member States giving public access to the beneficial ownership register is invalid and a serious breach of the fundamental right to privacy and data protection

The EU’s 5th Anti-Money Laundering Directive of 2018 required Member States to open their beneficial ownership registers to all members of the public.  This provision was seen as very progressive and deterrent to financial crime.  

In Malta, to comply with the above cited Directive, a framework of legislation was enacted to establish a Register of Beneficial Owners for Companies, Foundations, Associations and Trusts to be maintained by the MBR or the MFSA with access to information on beneficial owners being available to the public on payment of a minimal fee.

CJEU Decision

On the 22nd November 2022, the Court of Justice of the European Union (CJEU) delivered a judgement in Joined Cases C-37/20 and C-601/20 following a request for a preliminary ruling concerning the interpretation of certain provisions of the anti-money laundering directive, specifically that the information on beneficial ownership of companies and other legal entities within their territory must be accessible in all cases to any member of the general public, and the validity of those provisions with respect to the Charter of Fundamental Rights of the European Union (“the Charter”), most notably Articles 7 and 8, the right to the protection of one’s personal data.

The Court concluded that the Article 30(5)(c) of Directive 2015/849 as amended is invalid in such way that it obliges Member States to make accessible to any member of the general public in all cases information on the beneficial ownership of companies and of other legal entities incorporated within their territory.

Reasoning

The Court concluded the following:

  • The general public’s access to information on beneficial ownership provided in the AML Directive 2015/849 as amended, constitutes a serious interference with the fundamental rights enshrined in Articles 7 and 8 of the Charter;

 

  • According to the Charter, subject to the principle of proportionality, limitations may be made on those rights and freedoms only if they are necessary and genuinely meet objectives of general interest recognized by the EU or the need to protect rights and freedoms of others;

 

  • Article 8(2) of the Charter provides that personal data must, inter alia, be processed for specified purposes and on the basis of the consent of the person concerned or some other legitimate basis laid down by law;

 

  • That the general public’s access to such BO information is provided for by an EU legislative act, namely Directive 2015/849 as amended;

 

  • However, Directive 2015/849 provides that the processing of personal data is subject to Directive 95/46, GDPR, and therefore, any collection, storage and making available of information under Directive 2015/849 as amended must fully meet the requirements arising from GDPR;

 

  • As to the objective of ‘general interest recognized by the EU’, by providing for the general public’s access to information on beneficial ownership, the EU legislature seeks to prevent money laundering and terrorist financing by creating, by means of increased transparency, an environment less likely to be used for those purposes;

 

  • However, the principle of transparency cannot be considered as an objective of general interest capable of justifying the interference with fundamental rights which results in having general public data concerning the identity of private beneficial owners and the nature and extent of their beneficial interests easily accessible to the general public;

 

  • That the original version of article 30(5) of Directive 2015/849 before it was amended by Directive 2018/843 made access to such information conditional upon that person being able to demonstrate a ‘legitimate interest’;

 

  • That the press and civil society organizations that are connected with the prevention of and combating of money laundering and terrorist financing do have a legitimate interest in accessing such information on beneficial ownership. The same applies to persons who are entering into transactions with companies and other legal entities as well as financial institutions and authorities involved in combating offences of money laundering;

 

  • The same cannot be said in regard to the general public and its online access to such BO information and such access amounts to a considerably more serious interference with fundamental rights under Article 7 and 8 of the Charter.

 

Criticism

This judgement has already sparked a series of criticism from international organizations and civil society organizations such as Transparency International who believe that this decision has ‘set back by years the fight against cross-border corruption’ especially at a time when public scrutiny in uncovering corruption and money laundering is so fundamental on a global scale.

Still the Court recognized the ‘legitimate interest’ of the press and civil society organizations in accessing such information due to their important role in the fight against corruption and money laundering.

For more information, please contact Dr Sarah Galea or any member of IURIS Advocates.