Financial Transparency Coalition

Earlier this week, the Dutch Finance Minister, Mr Dijsselbloem, announced that the government would make the upcoming register of beneficial ownership, the so-called UBO-register, open to the public. This is in line with what the majority of parliament voted for in March 2014, and means the Netherlands will join a growing list of countries that have decided that the public should have access to this information.

In order to prevent people from hiding behind dummy companies when committing financial crime (think of a puppet master holding a puppet to sign for a bank account to store ill-gotten gains), accurate and up to date information on the real owners behind the company (beneficial owners) needs to be available. With this data, banks can check whether or not to open a bank account, and public and private investigators at home or abroad can check who are controlling companies in a given jurisdiction.

The EU recognises this need and mandated that, at a minimum, member governments should have a central register with this information that could be accessed by law enforcement agencies, so-called obliged entities (those professions and companies that are obliged to conduct know-your-customer’ checks) and the public.

There’s one important caveat to this European rule though: public access may be subjected to a ‘legitimate interest test’. No one knows what this means exactly, as it is not defined in the EU legislation, but it is assumed that governments can deny a given request for information on the grounds that it lacks legitimacy.

Now the Dutch government, “after a comprehensive thought process” has come to the conclusion that enforcing this legitimate interest test would be “hard to control, hard to enact, and costly” and that it will therefore make its register fully public.

We have followed both the European and this national legislative process closely, so it is worth noting that the Dutch government interestingly plans on adding a requirement for obliged entities to flag any inaccuracies they may find in the register, after doing their own customer due diligence, to the register-holder. This will likely improve the data quality.

What’s left to fight for?

There are a couple of outstanding issues, however, that still need addressing. For example, the Dutch government is currently thinking of including what it calls 4 “privacy guarantee” clauses, namely:

• registering each user of the UBO-register;

• charging a fee for each search;
• limiting the information obtainable publicly to the bare minimum, meaning: name, month and year of birth, nationality, place of residence and nature and size of the economic stake of the BO in the legal entity*;
• and those beneficial owners who can argue they run significant risk of being “kidnapped, blackmailed, threatened or intimidated” will – on an individual basis, so presumably never a blanket exemption – be shielded from publicity.

The levying of fees is particularly problematic, as it will prevent any serious screening of the full data set. Imagine that you have a list of barred directors from the United States, and that you want to cross-reference this with the Dutch UBO-register to see of any of them is directing firms in the Netherlands, the cost of paying for each individual name could be substantial.

The single most worrying aspect of this communication from the Government to the Parliament, however, is that there is no mention of having the register in an open data format. The Dutch government can be seen as a champion in this field, and it would be interesting to hear from them if the omission of this is accidental, or if there is more to it. Simultaneously, the UK’s Companies House is pressing forward with its equivalent register of persons with significant control, and this will be offered as open data, which they feel will make it more business-friendly.

*Competent authorities and the Dutch Financial Intelligence Unit when exercising oversight or investigations will also have access to: day of birth; place and country of birth; address; TIN when available; key data of, or a copy of the ID that was used for verification; the documentation that goes with the economic stake of the beneficial owner.