Top EU court judgment allowing beneficial owners anonymity to general public may hinder AML/CFT compliance processing

The decision of the European Union Court of Justice (ECJ) that beneficial owners of registered companies can remain anonymous to the general public may hinder the ability of financial institutions seeking to quickly and easily obtain beneficial ownership in the course of their anti-money laundering and counter financing of terrorism (AML/CFT) processes.

Anti-corruption and tax transparency campaigners meanwhile have reacted angrily to the decision that registers containing the personal details of beneficial owners of companies and accessible to the public at large infringe fundamental rights.

EU AML directive ‘invalid’

The judgment follows several appeals in Luxembourg, which in accordance with the EU’s 2015 AML directive, adopted in 2019 a law establishing a register of beneficial ownership that provides a whole series of information on the beneficial owners of registered entities that must be entered and retained in that register.

In the ECJ’s judgment, in the light of the Charter of Fundamental Rights of the EU Charter, the provision of the AML directive requiring that information on the beneficial ownership of corporate and other legal entities incorporated within their territory is accessible in all cases to any member of the general public is invalid.

The court holds that the interference entailed by that measure is neither limited to what is strictly necessary nor proportionate to the objective pursued while the AML directive amounts to “a serious interference with the fundamental rights to respect for private life and to the protection of personal data.”

Retrograde step

But a statement by the Tax Justice Network says the ECJ has “barred EU governments from exercising one of the most powerful measures against financial secrecy of the past decade, immediately triggering a growing transparency blackout across the bloc.”

Transparency International’s lead on beneficial ownership transparency and AML, Maíra Martini, responded to the judgment too. “Access to beneficial ownership data is vital to identifying – and stopping – corruption and dirty money. The more people who are able to access such information, the more opportunity [there is] to connect the dots,” she said.

Legislative review

The ECJ appears to realise that its judgment may represent a retrograde step in the EU’s AML/CFT efforts and has asked European lawmakers to review the legislation.

It holds that the EU legislature should pursue an objective of general interest capable of justifying even serious interferences with the fundamental rights enshrined in the Charter, and that the general public’s access to information on beneficial ownership is appropriate for contributing to the attainment of that objective.

The ECJ has issued a statement on its judgment which can be found here.



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