The frontier between privacy and transparency is always shifting, sometimes because of modern technology, or anger about money laundering on one side, and intrusion into innocent people's lives, on the other.

The drive to create public registers of beneficial ownership, potentially accessible by journalists, education bodies and other groups, continues to stir controversy as policymakers juggle the fight against dirty money with protecting legitimate financial privacy.

In November last year, the Court of Justice of the European Union, (CJEU) said the general public’s access to BO data was a serious threat to financial privacy.

The court’s ruling was hailed at the time by law firm Mishcon de Reya, for example. However, it also prompted anger because it was seen as hobbling the ability to probe illicit wealth transfers. (See here for a related discussion on our WealthTalk channel.)

In late March 2023, members of the European Parliament, undeterred by the CJEU’s ruling, renewed calls for such BO disclosure; it has also called for further tightening of anti-money laundering controls and a ban on citizenship-by-investment programmes in the 27-member European Union. 

In the background there is concern that laundered money from the former Soviet Union and other places has penetrated the EU.

In March 2022, the EU along with several other jurisdictions – including Switzerland - slapped sanctions on designated Russians.

Ieva Tarailiene, head of registry practice at NRD Companies, spoke to this news service about the situation. 

“The global focus on preventing money laundering and terrorist financing is on the rise, and accurate and complete data on beneficial ownership plays a critical role in these efforts,” Tarailiene said. “Unfortunately, anonymous shell companies and other legal entities often hide the true beneficial owners of assets, making it challenging to track illicit financial flows. To address this, policymakers and regulators are working with industry stakeholders to develop effective data collection and verification processes.”

The 6th Anti-Money Laundering Directive has been introduced to enhance transparency in corporate entities. The directive allows the entity in charge of the central register to request from corporate and legal entities any information necessary to identify and verify their beneficial owners.

"There is a lack of clarity about how those who want to search these public registers can prove their have a legitimate reason to do so," she said. 

“The directive also foresees that persons with a legitimate interest, such as journalists, reporters, other media, and civil society organisations, should be able to access the register, including the interconnected central registers,” she said. 

But public registers also fit an important need, Tarailiene said. “Abolishing general public access to the data raises the importance of it being available and accessible to civil society organisations involved in preventing and combatting money laundering.”

On 22 November, the CJEU ruled that “the general public’s access to information on beneficial ownership constitutes a serious interference with fundamental rights to respect for private life and to the protection of personal data.”

Court vs directive
The ruling shows how courts can clash with other rules. NRD Companies said that the CJEU’s position goes against the EU’s 5th Anti Money Laundering Directive which required member states to make company BO information accessible to the public. 

Several EU countries including Belgium, the Netherlands, Luxemburg, Germany, Ireland, and Austria have suspended public access to BO information or limited the access to designated professions.

The UK government recently said that access to data regarding persons with significant control (PSC) and registrable beneficial owners (RBOs) was necessary to prevent and detect crime.

This news service has commented on the frontier between privacy and transparency. Another issue that could cause concern is the potential creation of central bank digital currencies, which could give even democratic governments the ability to peer into everyone's lives in ways that raise troubling questions.