Background Information

History of Beneficial Ownership Registers

In 2013, what was then the G8 (i.e. the G7 plus Russia prior to its exclusion in 2014) met in Lough Erne in Northern Ireland to assert its commitment to 'open economies, open societies and open governments as the basis of lasting growth and stability'. As such, the G8 leaders also affirmed their commitment to 'to make information on who really owns and profits from companies and trusts available to tax collection and law enforcement agencies, for example through central registries of company beneficial ownership'.

In April 2016, the UK led the way with the enactment of public registers of People with Significant Control.

Shortly afterwards, the European Union adopted the 4th EU Anti-Money Laundering Directive which provided for the creation of central registers of beneficial ownership of companies, trusts and similar arrangements.

The adoption of the 5th EU Anti-Money Laundering Directive in 2018 opened the registers of beneficial ownership of companies to the public at large, further enabling anyone who can show a 'legitimate interest' to have access to beneficial ownership information held in the central registers of EU Member States.

Against this backdrop, a number of jurisdictions (including the British Crown Dependencies and Overseas Territories, as well as Canada) have announced the introduction of public registers of beneficial ownership.

In the US, central registers administered by the US Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) have been introduced following the adoption of the Corporate Transparency Act in 2021. Unlike the EU registers, the US registers are not (yet) accessible to the public.

Data Protection Issues

Data protection concerns in relation to the public nature of beneficial information registers have been raised by the European Data Protection Supervisor (EDPS), the umbrella organisation of EU national data protection authorities (WP29) and a number of national data protection authorities.

In an opinion issued ahead of the introduction of the 5th EU Anti-Money Laundering Directive, the EDPS held that "the amendments significantly broaden access to beneficial ownership information by both competent authorities and the public…. We see, in the way such solution is implemented, a lack of proportionality, with significant and unnecessary risks for the individual rights to privacy and data protection."

Court challenges

Following a number of appeals, including from Mishcon de Reya, the question of the compatibility of public registers of beneficial ownership with fundamental rights has been referred to the Court of Justice of the European Union (CJEU). In January 2022, the EU's Advocate General issued an opinion stating his view that beneficial ownership data is not 'particularly sensitive', so that its publication does not lead to any significant limitations of fundamental rights. This opinion, and its potential repercussions if the CJEU follows the opinion of its Advocate General is discussed in an article published by Tax Notes International.

EU Advocate General publishes opinion

On 21 January 2022 the EU's Advocate General published his opinion in a case referred by the Luxembourg District Court concerning the compatibility of public registers of beneficial ownership with individuals' fundamental rights to privacy and data protection (as reported here and here).

In his opinion (currently only available in French), the EU's Advocate General concluded that a public register containing the personal data of individuals who directly or indirectly own a substantial interest in private businesses genuinely meets public objectives and does not entail a disproportionate limitation of their right to privacy

Filippo Noseda, a partner at Mishcon de Reya who has been representing a number of clients in relation to beneficial ownership registers, as well as the automatic exchange of information, commented:

"This is a worrying development and is partly the result of a lack of debate of the data protection implications of BO-registers in the public arena. Had the EU suggested the introduction of central registers of DNA / fingerprints, or even a central scheme of identity cards, and suggested that this was necessary to fight crime, public opinion would have been up in arms. It is difficult to see how unrestrained public access to personal information in relation to private enterprises can be seen as a necessary step to fight money laundering.

Today's opinion is particularly disconcerting, as the author of today's opinion, a former head of the Italian anti-trust agency, ignored the opinion issued by the Italian State Council, which concluded as recently as 6 December 2021 that the indiscriminate access to personal information by the public violated was in breach of EU law.

It is to be hoped that the European Court of Justice will depart from today's opinion."