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EU Court of Justice puts beneficial ownership transparency in danger

November 23rd, 2022

The Financial Transparency Coalition (FTC) and its members are alarmed and disappointed by the decision by the European Court of Justice (ECJ) published on November 22  that invalidated the provision of the 5th EU Anti-Money Laundering Directive (ALMD5) that guaranteed public access to information about companies´ beneficial owners on the grounds of protecting privacy.

The Directive of 2018 played a crucial role in ensuring that EU countries opened up their beneficial ownership registries to the public, setting a precedent and an example of transparency for other countries to follow, something which the ECJ’s decision has undermined.

Matti Kohonen, Executive Director of the Financial Transparency Coalition, said: “ECJ’s decision is a major setback in the fight against Illicit Financial Flows (IFFs) of all types including economic and natural resource crimes, corruption, and tax abuses. Business ownership is not a private matter, and there is no evidence that public beneficial ownership registries have put any business owners at personal risk.  Where such risks can be demonstrated, individuals can already apply for exclusions from public registries, so there’s no justification for this decision.”

Adrian Falco, director of Fundación SES, said: “This blow undermines progress towards fiscal transparency not only in Europe, but also in Latin America and the Caribbean. Public beneficial ownership records allow us to know the true identity of Latin Americans who have companies in Europe, which is key to ensure they pay their proper taxes. We reject from our region any attempt to return to the opacity that does so much damage to our public finances in the midst of a cost-of-living crisis.”

Roland Papp, senior policy officer at Transparency International EU, said: “Today the European Court of Justice recognised that press and civil society organisations are instrumental in preventing and combatting money laundering and therefore have a legitimate interest in accessing information on beneficial owners. It’s now time for the European Parliament and Council to codify this by guaranteeing access in the current 6th EU Anti-Money Laundering Directive. But that’s not enough; the new directive should also include precise provisions that reconcile public access with privacy and security concerns.”

We understand that the directive will now return to the European Parliament whilst admitting that civil society and the media have a legitimate interest in accessing this type of information. Therefore, and we will work to ensure that public access to beneficial ownership registries is further codified with a wide scope of grounds for the use of this information, while respecting legitimate privacy safeguards. The current directive only considered IFFs originating from money laundering and terrorist financing but should in the future codify the wider uses of beneficial ownership transparency from fighting tax abuses to natural resource crimes.

Notes to editors

The Financial Transparency Coalition (FTC) is a global civil society network operating as a collaborative coalition of 11 civil society organisations based in every region of the world. The FTC works to curtail illicit financial flows by promoting a transparent, accountable, and sustainable financial system that works for everyone.

The FTC members are Transparency International, the Asian Peoples Movement on Debt and Development, Centre for Budget and Governance Accountability, Christian Aid, European Network on Debt and Development, Fundación SES, Global Financial Integrity, Latin American Network on Debt, Development, and Rights, Pan-African Lawyers Union, Tax Justice Network and Tax Justice Network Africa.

The full text of the ruling can be accessed here: https://curia.europa.eu/juris/document/document.jsf;jsessionid=66B70588C0220A2067037C74990CFB53?text=&docid=268842&pageIndex=0&doclang=EN&mode=req&dir=&occ=first&part=1&cid=1093680

The concluding paragraph of the ruling states that:

Article 1(15)(c) of Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018 amending Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, and amending Directives 2009/138/EC and 2013/36/EU, is invalid in so far as it amended point (c) of the first subparagraph of Article 30(5) of Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending Regulation (EU) No 648/2012 of the European Parliament and of the Council, and repealing Directive 2005/60/EC of the European Parliament and of the Council and Commission Directive 2006/70/EC, in such a way that point (c) of the first subparagraph of Article 30(5), as thus amended, provides that Member States must ensure that information on the beneficial ownership of companies and of other legal entities incorporated within their territory is accessible in all cases to any member of the general public.”

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