CJEU on beneficial ownership register: a setback in the fight against Money Laundering
At the end of November 2022, the Court of Justice of the European Union (CJEU) made a decision on Beneficial Ownership (BO) registers impacting all BO registers of European countries. According to the CJEU, the possibility of the public having insights about the BO's is not in line with EU regulations. Many European countries reacted instantly. Restrictions and closures of the respective BO registers were the main responses.
The fourth EU Money Laundering Directive from20th May 2015 obligated European countries to establish a register for the identification of Beneficial Ownership of companies and other related legal entities. This was seen as a major milestone in the fight against Money Laundering and Terrorism Financing by many experts. The registers contain relevant information about the Beneficial Owners such as first- and last name, Place of Birth, the type of economic interest etc.. This was a signifiant support for several authorities and prosecutors. Also, KYC obligated parties such as banks, tax advisors and real estate agents took benefit from these registers to fulfill their obilgations.
An Entrepreneur from Luxembourg who has main ownership of several companies such as Luxaviation made a lawsuit against the exposure of his personal data in the BO register. According to him, he is afraid of possible haressments and kidnapping of his family and himself resulting from the data exposed in the Transparency registers.
This has led to the decision of CJEU that personal information can only be exposed to people with relevant interests while the interests have to be analyzed carefully for all affected companies. As a consequence the administrative effort of authorities, prosecutors and obligated parties will increase considerably. Therefore, the identification of BO's becomes more time consuming and costly. Given the fact that resources of these entities are restricted it becomes clear that this decision means a major setback for combating Financial Crime.
CURENTIS as a company which is specialized in Anti-Financial Crime agrees on the relevance of data protection of BO's. However, this should not be conducted at the cost of combating financial crime. The implementation of an EU-wide BO register with a clear definition of parties which have access would be an effective solution for the problems that are mentioned above.