On 22 November 2022 the Court of Justice of the European Union (CJEU) has issued a landmark ruling regarding the implementation of Ultimate Beneficial Ownership (UBO) Registers across the European Union (EU).
The Request for a PR & CJEU’s Judgment
The CJEU’s Judgment follows a request for a preliminary ruling referred by the Tribunal d’arrondissement (Luxembourg District Court) on 24 January 2020 concerning the interpretation of certain provisions of the 5TH AML (EU) Directive 2018/843 and the validity of those provisions assessed against the Charter of Fundamental Rights of the EU (the Charter).
According to the CJEU, the amendment of Article 30(5)(c) of the 4TH AML Directive (EU) 2015/849 by Article 1(15)(c) of the 5TH AML (EU) Directive 2018/843, by which EU Member States are obligated to ensure that information on the beneficial ownership of companies and other legal entities incorporated within their territory is accessible in all cases to “any member of the general public”, is invalid.
Reasoning behind CJEU’s Judgment
The reasoning behind the CJEU’s Judgment revolves around privacy, personal data and economic data being made available on UBOs, because the information disclosed enables a potentially unlimited number of persons to find out about the material and financial situation of a UBO.
Furthermore, the potential consequences for UBOs (as data subjects) resulting from possible abuse of their personal data are exacerbated by the fact that, once those data have been made available to the general public they can, not only be freely consulted, but also retained and disseminated.
It therefore follows that, “in the event of such successive processing, it becomes increasingly difficult, or even illusory, for those data subjects to defend themselves effectively against abuse.” (Judgment, para.43)
Moreover, the CJEU found that the EU legislature’s pursued objective of general interest is to prevent money laundering and terrorist financing by creating, by means of increased transparency, an environment less susceptible to those purposes.
According to the CJEU such an objective, first, is capable of justifying even serious interferences with fundamental rights enshrined in Article 7 (Respect for Private & Family Life) and Article 8 (Protection of Personal Data) of the Charter and, second, the general public’s access to beneficial ownership information is appropriate for contributing to the attainment of that objective.
However, the CJEU highlighted, amongst others, that:
• the fact that it may be difficult to provide a detailed definition of the circumstances and conditions under which the public may access information on beneficial ownership is no reason for the EU legislature to provide the general public with access to that information (Judgment, para.72).
• the interference entailed by the amendment in the 5TH AML (EU) Directive 2018/843 is neither limited to what is strictly necessary nor proportionate to the objective pursued (Judgment, para.76).
• The provisions at issue allow for data to be made available to the public which are not sufficiently defined and identifiable, through the use of the expression “at least” in Article 30(5) of the 4TH AML Directive and maintained Article 1(15)(c) of the 5TH AML Directive (Judgment, paras.81-82).
• The regime introduced by the 5TH AML Directive, providing for the general public’s access to information on beneficial ownership, amounts to a considerably more serious interference with the fundamental rights guaranteed in Articles 7 and 8 of the Charter (Judgment, para.85).
• The operational provisions which allow EU Member States to make information on beneficial ownership available on condition of online registration and to provide, in exceptional circumstances, for an exemption from access to that information by the general public, respectively, are not (in themselves) capable of demonstrating either a proper balance between the aforementioned objective of general interest pursued and the fundamental rights enshrined in Articles 7 and 8 of the Charter, or the existence of sufficient safeguards enabling data subjects to protect their personal data effectively against the risks of abuse (Judgment, para.86).
The CJEU Judgment in Joined Cases C-37/20 (Luxembourg Business Registers) and C-601/20 (Sovim) is available here.
UBO Register in the Republic of Cyprus: what’s next?
Following the CJEU’s ruling, it is now in the hands of the competent authorities of the Government of the Republic of Cyprus to submit their recommendations for amending the AML / CTF Law and deducting the provisions for public access to the Cypriot UBO Register to the Council of Ministers and subsequently, for such legislative amendment to be put before Parliament for voting.
Reconciling CJEU’s ruling into new, 7TH EU AML Directive
It remains to be seen how the European Parliament, along with the Council of the EU, will reconcile the implementation of the 6TH EU AML Directive currently in force, with regard to its public access to EU UBO Registers provisions, in light of the CJEU’s ruling.
It is anticipated that a new, 7TH AML Directive will include provisions that balance, on one hand, the public’s general interest in accessing information on beneficial owners with UBO’s fundamental rights to respect for private life and to the protection of personal data, on the other hand.
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