Not too long ago, an investigation into cross-border corruption and money laundering would have hit a dead end after stumbling upon a Cypriot or Luxembourgish company. Things were starting to look up after the 2018 EU anti-money laundering directive which led to the creation of public registers with information on companies’ real owners. Now, everyone with the mandate of following the money is faced with uncertainty again.
It has been nine months since the EU Court of Justice (CJEU) struck down public access to information on companies’ ultimate owners, also known as ‘beneficial’ owners. This was a major setback not only for the anti-money laundering agenda but also for the fight against corruption, tax abuse and other white-collar crimes – which all depend on transparency in company ownership.
The current revision of the anti-money laundering directive is an important opportunity to salvage the EU’s corporate transparency framework. To comply with the CJEU decision, forthcoming EU rules will dictate that access to beneficial ownership data will need to be based on “legitimate interest”. But how legitimate interest will be determined and regulated is the crux of the matter.
Regulating legitimate interest access in the EUOur position
Whose interest is legitimate?
The court was clear: media and civil society organisations that are involved in the fight against money laundering have a legitimate interest in accessing data on companies’ real owners. This means that journalists and civil society organisations should be able to access this information without having to demonstrate their legitimate interest in specific cases.
[B]oth the press and civil society organisations that are connected with the prevention and combating of money laundering and terrorist financing have a legitimate interest in accessing information on beneficial ownership.
Transparency International believes that this presumption should be reflected in EU-wide rules. The forthcoming 6th EU anti-money laundering directive (AMLD) should specify that requests to access beneficial ownership registers should be granted automatically and without discrimination to public watchdogs – both inside and outside the EU – who work on issues connected to money laundering, terrorism financing or their predicate offences such as corruption, tax evasion and environmental crimes.
The CJEU ruling also mentions other actors who may have a legitimate interest in accessing beneficial ownership data. For example, the court considers that members of the public who want to know the real owners of a company they are transacting with have a legitimate interest in accessing this information.
Other stakeholders whose legitimate interest EU co-legislators should recognise and spell out in the 6th EU AMLD include:
- government authorities such as election management bodies and supreme audit institutions, when access to beneficial ownership information will support the prevention and combatting of money laundering and its predicate offences;
- foreign competent authorities tasked with the fight against money laundering, its predicate offences or terrorism financing;
- academics working on studies and analysis to support the fight against money laundering;
- any other member of the public that can demonstrate a legitimate interest in connection with the objectives of 6th EU AMLD.
How should access be granted?
Transparency International believes that the 6th EU AMLD should clearly spell out that media and civil society whose work is connected to the prevention of money laundering, its predicate offences or terrorism financing should gain general access to beneficial ownership registers. Such generalised access would ensure that member states cannot restrict the ability of public watchdogs to conduct their work.
Leaving it to member states to decide how they want to regulate legitimate interest – as was the case with the 4th EU AMLD of 2015 – is a frightening scenario. This would create room for governments to put in place systems where requests are considered on a case-by-case basis. Not only would this be time-consuming for activists and journalists, but it would also create an unnecessary administrative burden on public authorities and be open to abuse.
Access on a case-by-case basis is not an option
In 2018, before the 5th EU AMLD came into effect, Germany’s company beneficial ownership register was granting access to stakeholders based on proof of legitimate interest. Netzwerk Steuergerechtigkeit Deutschland, a German non-governmental organisation who fulfilled the pre-determined criteria, submitted two requests for information on the beneficial owners of three legal entities suspected in tax avoidance and money laundering. Requests were eventually granted, but only after the organisation provided additional information. In one case, a two-page explanation of the reasons for the request was not sufficient; in the other, a journalist ID was requested, even though the request was not in the context of a media investigation.
More recently, after shutting down public access to the registers in late 2022, several EU member states started to consider access requests on a case-by-case basis. In Malta, at least two organisations – one media and one civil society – had their requests rejected despite clear legitimate interest. In Cyprus, journalists were treated differently to some activists and were denied access to information on the owners of companies they were investigating, even after paying the fee.
EU rules could require that journalists and activists register once with at least one member state, thus demonstrating that they fulfil the requirements. Recognition by one EU country should serve as sufficient grounds for others to provide media and civil society with access to beneficial ownership registers. And once access is granted, these actors should be able to freely search the beneficial ownership register. Luxembourg, where journalists are given a digital token that allows them to access and use the register, is already following this approach.
As for other stakeholders, the EU could require member states to make it possible for them to request general access to the register through a partnership model or similar.
Why do we need to know who owns EU companies? Experts explain in our video with the Anti-Corruption Data Collective.
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Why access matters
Thanks to the decades of secrecy provided by anonymous company ownership, unscrupulous individuals from across the world have found safe haven in the EU – circumventing sanctions, evading accountability and committing further crimes with impunity. It is clear that EU authorities alone cannot uncover all the abuses and keep up with criminals’ evolving methods. Many schemes would go undetected if not for the dedicated work of investigative journalists and activists around the world.
Independent actors tracking illicit flows of money should not have to jump through hoops to find out who’s really behind suspicious companies. The EU acknowledged this in 2015 and then again in 2018 by establishing and widening stakeholder access to beneficial ownership information of companies.
The impact of these measures was just becoming visible when CJEU invalidated public access provisions of the 5th EU AMLD last November. In the context of anti-money laundering, the court failed to see the added value in expanding access to information on companies’ real owners to everyone without the need for them to prove legitimate interest. And while unfortunate, this does not mean that we need to give up on public registers in the EU: Considering the potential of beneficial ownership information in a variety of other sectors beyond anti-money laundering, countries should open up this information to the public through alternative frameworks – as Estonia and Latvia have done.
In the meantime, it is critical to ensure that the 6th EU AMLD complies with the court ruling and at the same time upholds corporate transparency. In March, the European Parliament made their own progressive amendments to the draft legislation. Little is known on the specific positions of the Council, so we at Transparency International have called on them to match the Parliament’s ambition. The European Commission has a role to play in ensuring that independent actors can fulfil their watchdog role as recognised by the court, too.
Anything that falls short of this will open doors to inconsistent application of rules across member states, create unnecessarily cumbersome procedures and enable more infractions.
Our corrupt money flows expert Maíra Martini unpacks the EU court’s decision to invalidate public access to beneficial ownership registers and explains its implications.
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