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With the amendment to the AML Directive in 2018, it was the legislator’s aim to improve the overall transparency relating to the prevention of money laundering or terrorist financing. In this context, wider access was allowed so as to include others than just the competent authorities, obliged entities within the framework of customer due diligence procedures and persons and organisations with a “legitimate interest” in the group of individuals with access to information on beneficial ownership, and as a novelty “any member of the general public” was allowed access to the information.[1]
Article 30(5)(a-c) of Directive 2015/849[2] (“the 4th Money Laundering Directive”) provided as follows:
“Member States shall ensure that the information on the beneficial ownership is accessible in all cases to:
In 2018, the EU legislator adopted a number of amendments to the Money Laundering Directive[3] (Directive 2018/843, “the 5th Money Laundering Directive”). Article 30(5)(c), now provides:
“Member States shall ensure that the information on the beneficial ownership is accessible in all cases to:
With this amendment, it was the EU legislator’s aim to make information on beneficial ownership accessible to everyone and anyone without the earlier requirement of having to state a legitimate interest. See the amendment in point (c).
The amendment was introduced because the objective of the Directive is to prevent the use of the Union’s financial system for the purposes of money laundering and terrorist financing, and the pursuit of this objective can only be effective if “the environment is hostile to criminals” according to the EU legislator. Enhancing the overall transparency “could therefore be a powerful deterrent”.
The purpose of widening public access was to give civil society better possibilities for scrutinising details and help maintain confidence in the integrity of business transactions and the financial system.
Moreover, the wider access would contribute to combating the misuse of corporate and other legal entities and legal arrangements for the purposes of money laundering or terrorist financing, both by helping investigations and through reputational effects.
The EU Court of Justice has now had the opportunity to take a position on whether the right balance exists between, on the one hand, the requirement of transparency in information on beneficial ownership and, on the other hand, the right to privacy and to protect personal data.
The matter at issue in the case before the Court was a Luxembourg act introducing a register to store information on beneficial owners and to make this information accessible. Part of the information was available to the public via the Internet. In addition, under the act it was possible for a beneficial owner to request the Luxembourg Business Registers to restrict access to the information in specific cases.[4]
The dispute arose out of two actions brought by a Luxembourg company and the beneficial owner of another company, respectively, who had unsuccessfully sought to restrict public access to the information on the grounds that such access could give rise to a risk of fraud, kidnapping, blackmail, harassment, violence, intimidation or detention.
It was argued in the case, among other things, that the granting of public access to the identity and personal data of the beneficial owner would infringe the right to respect for private and family life and the right to the protection of personal data.
Article 7 of the Charter guarantees everyone the right to respect for his or her private and family life, home and communications. Article 8(1) of the Charter expressly confers on everyone the right to the protection of personal data concerning him or her.
The Court of Justice ruled that the new Article 30(5)(c), of the 5th Money Laundering Directive is invalid.[5]
The Court of Justice determined that general public’s access to information on beneficial owners constitutes an interference with the fundamental rights to privacy and to the protection of personal data. The published information allows an unlimited number of persons to obtain information on beneficial owners’ material and financial situation and could give rise to potential abuse of their personal data, which could be freely consulted, retained and disseminated.
The Court of Justice ruled that the general public’s access to the information amounts to a serious interference with the fundamental rights. The fundamental rights enshrined in Articles 7 and 8 of the Charter are not absolute rights, but must be considered in relation to their function in society. The Court of Justice then analysed compliance with Article 52(1) of the Charter that in certain circumstances allows for interference with the fundamental rights.
The purpose of the amendment to the rule – to prevent money laundering and terrorist financing by enhancing transparency – constitutes an objective of general interest that can justify interference with the fundamental rights. The general public’s access to the information is appropriate for contributing to the attainment of this objective.
However, the interference was neither limited to what is strictly necessary nor was proportionate to the objective pursued (principle of proportionality).
There was no objective justification for extending the group of individuals entitled from one person or organisation with a “legitimate interest” to anyone and everyone.
The Court of Justice found that there was no proper balancing between the objective of general interest pursued and the fundamental rights or the existence of sufficient safeguards enabling data subjects to protect their personal data effectively against the risk of abuse. In other words, the principle of proportionality was not complied with.
As regards the press and civil society organisations, the Court of Justice emphasised specifically that these have a legitimate interest in accessing information on beneficial ownership. However, the combat against money laundering and terrorist financing is as a priority a matter of the public authorities and for entities such as credit or financial institutions which are subject to specific obligations in this regard.
The judgment clearly shows that the Court of Justice takes the fundamental rights of the Charter seriously, and that the Court is not reluctant to invalidate even general legal acts where primary law, including the fundamental rights of the Charter, is not observed by the EU legislator.
The judgment has an immediate bearing on whom that can access the information.
Based on the wording of the first subparagraph of Article 30(5) of the 5th Money Laundering Directive, the Court of Justice’s ruling will (at least for a period of time) in terms of the law limit access to the information to (a) the competent authorities and financial intelligence units, and (b) obliged entities within the framework of customer due diligence.
If the EU legislator wishes to extend the group of persons to include – as previously – “any person or organisation that can demonstrate a legitimate interest”, the EU legislator will have to amend Article 30(5) and add the former point (c) to the wording.
The judgment establishes a practice already seen in the field of telecommunications data, where the storage (and disclosure (edition)) of such data must be limited to what is strictly necessary as regards, among others, the persons concerned. See, for instance, the judgment of EU Court of Justice of 6 October 2020, La Quadrature du Net (C-511/18, C-512/18 and C-520/18), where the Court held, among other things, that the protection of the fundamental right to privacy requires that derogations from and limitations on the protection of personal data must apply only in so far as is strictly necessary.[6]
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[1] Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018 amending Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, and amending Directives 2009/138/EC and 2013/36/EU.
[2] Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending Regulation (EU) No 648/2012 of the European Parliament and of the Council, and repealing Directive 2005/60/EC of the European Parliament and of the Council and Commission Directive 2006/70/EC.
[3] Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018 amending Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, and amending Directives 2009/138/EC and 2013/36/EU.
[4] Loi du 13.1.2019 instituant un Registre des bénéficiaires effectifs (mémorial A 15) (Act of 13 January 2019 establishing a register of beneficial owners).
[5] The answer to the first question in Case C-601/20 is therefore that Article 1(15)(c) of Directive 2018/843 is invalid in so far as it amended point (c) of the first subparagraph of Article 30(5) of Directive (EU) 2015/849.
[6] Judgment of 6 October 2020, La Quadrature du Net, C-511/18, C-512/18 og C-520/18, EU: C:2020:791. See also judgment of 16 July 2020, Facebook Ireland and Schrems, C-311/18, EU:C:2020:559.