Auteurs

Alison Cartin

Senior Counsel – Knowledge

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Alexander Erskine

Associé

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Auteurs

Alison Cartin

Senior Counsel – Knowledge

Read More

Alexander Erskine

Associé

Read More

4 juillet 2023

The continuing march towards transparency – 5 de 6 Publications

Is public access to UK beneficial ownership registers here to stay?

There is unrestricted public access to the UK's beneficial ownership register of UK companies (Register of Persons with Significant Control - PSC register) and of overseas entities that hold interests in UK land (Register of Overseas Entities – ROE). Many EU Member States no longer permit public access to their beneficial ownership registers of companies following a decision of the Court of Justice of the European Union (CJEU) that ruled doing so was unlawful. Despite this, the UK government has confirmed that it will continue to permit unrestricted public access to the PSC register and the ROE.

CJEU judgement: public access to beneficial ownership registers unlawful

The EU 5th Money Laundering Directive obliges EU Member States to ensure 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. On 22 November 2022, the CJEU held that general public access to registers of beneficial ownership of companies is invalid as it is a serious interference with the fundamental rights under EU law to the respect for private life and to the protection of personal data, and such interference is neither limited to what is strictly necessary nor proportionate to the objective pursued.

The above fundamental rights are enshrined in Articles 7 and 8 of the European Charter of Fundamental Rights (the Charter), respectively. The CJEU found that the interference with those rights was inappropriately limited because, in broad terms, the information disclosed enables a potentially unlimited number of persons, without demonstrating a legitimate interest, to find out about the material and financial situation of a beneficial owner, and freely to retain and disseminate the relevant data.

Following the judgement, many EU Member States took their beneficial ownership registers of companies offline, completely suspending public access. In many cases, public access to the registers remains closed, with access being restricted to those who have a 'legitimate interest', such as, revenue authorities, law enforcement agencies, and 'obliged entities' (broadly, entities, like financial institutions, who are obliged to carry out money laundering checks to verify the identity of new customers). France, however, after initially taking its register offline, has restored full public access while the country's Finance Minister considers reforms to the access criteria.

Access to beneficial ownership information was subsequently discussed by MEPs in March of this year, in the context of negotiations on the draft 6th EU Money Laundering Directive. Further to the CJEU's judgment, MEPs decided that access should be restricted to persons with a legitimate interest. However, this will include journalists and civil society organisations who prove to the satisfaction of one Member State that they have a legitimate interest. After passing this single threshold, such persons would, under current proposals, have access to all EU beneficial ownership registers for at least two and a half years.

UK's position following CJEU judgement

In February 2023, the UK government published a memorandum stating that, having re-evaluated the compatibility of the PSC register and the ROE with the European Convention on Human Rights (the Convention) (encapsulated into the UK legal system through the Human Rights Act 1998) in light of the CJEU decision, it continued to consider both regimes to be compliant with Article 8 (the right to respect for private and family life). It is relevant to note that the Convention is distinct from the Charter and is enforced through the European Court of Human Rights (ECHR) rather than the CJEU.

The government believes there are good policy reasons for allowing full public access to the PSC register and the ROE, and that the ability of registered beneficial owners to apply to have their personal information and information relating to their beneficial ownership "supressed" from the publicly accessible registers provides a sufficient safeguard and ensures the regimes "do not unjustifiably establish blanket intrusions into beneficial owners' Article 8 rights". However, the only ground for making an application for information to be supressed, so that it is not available for public inspection or disclosed by the registrar, is that the relevant individual, or a person living with them, would be at serious risk of being subjected to violence or intimidation if the information was disclosed. It remains to be seen what view the ECHR would take of this legislation and how the UK would react to any adverse findings, if ever made.

It is worth noting that the UK's Crown Dependencies (Jersey, Guernsey and the Isle of Man) have stated that they will delay implementation of legislation to allow full public access to their registers of beneficial ownership of companies in light of the CJEU decision in order to consider its implications. A number of the UK's Overseas Territories (including the BVI and the Cayman Islands) have also indicated that they will consider the impact of the CJEU judgement before taking any further steps towards full public access of beneficial ownership registers.

It should be remembered that information on the UK trust register is, in most cases, not freely accessible by the public; to access it someone must often be able to show that they have a 'legitimate interest' in accessing the information (in relation to countering money laundering or terrorist financing activity), and when requesting access must already have sufficient information in hand to be able to specify what they need.

Challenges in other areas of transparency

Challenges have also been brought against the automatic exchange of information between jurisdictions, under the Common Reporting Standard and US Foreign Account Tax Compliance Act (FATCA), on the grounds that it exposes compliant taxpayers to disproportionate and unnecessary risks to their data protection and security.

Belgium's data protection authority (DPA) has recently ruled that the transfer of financial account data to the US government under FATCA is unlawful under EU law. FATCA (and the associated bilateral intergovernmental agreements) requires non-US banks to make annual reports on US citizens' bank accounts to the US IRS (directly or via their own domestic tax authorities). The reporting is automatic and the information shared is indiscriminate and generalised; there is no requirement for there to be any indication of tax evasion or avoidance. The DPA’s statement said the data processing carried out does not comply with all the principles of the EU's General Data Protection Regulation, and instructed the Belgian Federal Public Service Finance to stop the transfers.

Where do we go from here?

A Cifas report, published in 2017 (before the current era of publicly accessible beneficial ownership registers) found that company directors, whose details were at that time freely accessible, were more than twice as likely to be the victims of identity fraud compared to the rest of the general population (Cifas is the UK’s leading fraud prevention service).

The drive towards transparency in tax matters and to access to beneficial ownership information is part of the global fight against money laundering and tax evasion. However, there is a growing appreciation, at least outside the UK, of a need to balance this laudable aim against an individual's fundamental human rights - the rights to privacy and protection of data – and the need to protect beneficial owners from risk, including risk of fraud, extortion, harassment, kidnapping and other criminal behaviour.

Clients would be well advised to consider the potential risks which currently exist, particularly in relation to their UK holdings, pending further review by judicial authority and/or legislative developments.

If you have any questions on how the issues raised affect you, please get in touch.

This article forms part of a series on transparency issues, including articles covering:

  • the latest UK disclosure obligations
  • beneficial ownership registers and trusts holding UK land
  • Register of Overseas Entities – missed deadlines and incorrect information
  • Register of Overseas Entities - changes impacting trust structures and requiring additional information
  • enhancements to the UK corporate beneficial owner register – the Register of Persons with Significant Control­­­­­­
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