The European Court of Justice in a recent judgment nullified a key provision in the 2018 version of the EU Money Laundering Directive requiring that information regarding beneficial owners registered in the European national transparency registers be publicly accessible. 

As reported in a prior LawFlash, German companies must report their beneficial owners to the transparency register for registration according to the Transparency Register and Financial Information Act (Transparenzregister- und Finanzinformationsgesetz (TraFinG)). A violation of the reporting obligation could trigger significant fines. Many other EU member states have similar national laws and transparency registers.

ECJ PROVIDES RELIEF TO PRIVACY CONCERNS OF BENEFICIAL OWNERS

The new November 22 judgment of the European Court of Justice (ECJ) (joined cases C-37/20 and C-601/20) coming from Luxembourg invalidates a significant part of the EU Money Laundering Directive (Directive):[1] The challenged provision in the Directive requires that the information on the beneficial owners of the companies or other legal entities registered in the transparency register be accessible to the public in all cases.

Specifically, Article 30(5) (c) of the Directive provides that the EU member states must ensure that information on the beneficial ownership of companies and of other legal entities incorporated within their territory must be accessible in all cases to any member of the general public. The ECJ declared this provision null and void.

The ECJ states in its judgment that “the general public’s access to information on beneficial ownership constitutes a serious interference with the fundamental rights to respect for private life and to the protection of personal data.” The goal in the Directive to prevent money laundering and terrorist financing by creating increased transparency would be “an objective of general interest capable of justifying even serious interferences with the fundamental rights enshrined in Articles 7 and 8 of the [EU] Charter [of Human Rights].”

While the ECJ acknowledged that the general public’s access to information on beneficial ownership is appropriate for contributing to reaching that goal, the ECJ found that the new provisions in the Directive allowing personal data in the national transparency registers to be made available to the public are not sufficiently defined and clear.

According to the ECJ, the access rules introduced by the 2018 version of the Directive would infringe considerably more on an individual’s fundamental rights guaranteed in Articles 7 and 8 of the EU Charter of Human Rights than those prior if such an individual is listed in a transparency register. The ECJ ruled that the legal safeguards in the Directive enabling data subjects to protect their personal data effectively against the risks of abuse are insufficient.

Specifically on that point, the ECJ states the following:

 “[…] the optional provisions of Article 30(5a) and (9) of Directive 2015/849 as amended, which allow Member States to make information on beneficial ownership available on condition of online registration and to provide, in exceptional circumstances, for an exemption from access to that information by the general public, respectively, are not, in themselves, capable of demonstrating either a proper balance between the objective of general interest pursued and the fundamental rights enshrined in Articles 7 and 8 of the Charter, or the existence of sufficient safeguards enabling data subjects to protect their personal data effectively against the risks of abuse” (ECJ Judgment at 86).

MORE RESTRICTIVE ACCESS TO THE TRANSPARENCY REGISTERS

As a result of this new judgment, the national transparency registers in the European Union must evaluate their access rules. Access may become much more restrictive in the light of the ECJ judgment.

The German transparency register currently no longer grants requests by members of the public for access until further notice. There has been no transmission of personal data on beneficial owners to members of the public since noon on November 22, 2022. The German registry’s administrator will provide further information in a timely manner on the further implications of the ECJ judgment.

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