Access to the GBR, the European justice puts a stop to financial transparency

What happened?

In accordance with the 5th Anti-Money Laundering Directive, Luxembourg has set up in 2019 a Register of Beneficial Owners (RBE). This register provides the entities subject to the AML directives with a whole series of information on the beneficial owners of registered entities, as well as some of this information to the general public.

Luxembourg law also provides for the possibility that a beneficial owner may request the Luxembourg Business Registers (LBR), the registry operator, to limit access to such information in certain cases.

In this particular case, the Luxembourg District Court was seized of two appeals lodged respectively by a Luxembourg company and by the beneficial owner of a company. The latter had unsuccessfully requested the LBR to limit the access of the general public to information concerning them.

In the context of these appeals, the court considered that the information accessible was likely to entail a disproportionate risk of infringement of the fundamental rights of the beneficial owners concerned. The court referred a series of questions to the Court of Justice of the European Union (CJEU) for a preliminary ruling on the interpretation of certain provisions of the Anti-Money Laundering Directive and on the validity of those provisions.

Focus on the decision of the Court of Justice of the European Union

Following this seizure, the CJEU invalidated this provision of the Directive on the grounds that it did not comply with the right to private and family life and the protection of personal data.

The Court underlines that access without distinction of quality of users, although imposed by the text of the directive transposed into Luxembourg law, is contrary to Articles 7 and 8 of the Charter of Fundamental Rights of the European Union.

It also states that the reporting requirement was intended "to prevent money laundering and terrorist financing by creating, through increased transparency, an environment less likely to be used for these purposes.

What the CJEU decision changes in access to BGR

The CJEU considers that the measures taken by the Member States to allow access to this information are not capable of guaranteeing the preservation of the rights of individuals.

It therefore condemns the public accessibility of the information, as this is deemed to infringe the rights of the beneficial owners.

Therefore, the register of beneficiaries should only be made available to taxable persons and companies with a legitimate interest in maintaining such access.

What are the impacts for European countries?

Following the decision of the CJEU, public access to beneficial owner data must be closed for all countries concerned.

Thus, Luxembourg, Austria, Germany, Belgium, Cyprus and Malta have limited access to their registers either partially (only available to the press and to AML taxpayers) or completely. To date, some member states have not decided on the application of the CJEU decision.

What about France?

France, for its part, has decided through a press release from Bruno Le Maire, Minister of Economy, Finance and Industrial and Digital Sovereignty, to maintain public access to the data in the register of beneficial owners while waiting to draw all the consequences of the European Court of Justice's ruling.

As a reminder, the register of beneficial owners (RBE), launched in France in April 2021, offered citizens the ability to easily find out who owns French companies. It was seen as an important step forward in terms of financial transparency and the fight against fraud and money laundering.

A stop to financial transparency in Europe?

Many political actors and NGOs have reacted strongly to the decision of the CJEU. Indeed, they denounce a step backwards in terms of economic transparency.

However, the Court's decision may allow access to company beneficiary records for those who can prove a "legitimate interest", such as NGOs and journalists.

But in fact, what is the purpose of the beneficial owners?

The identification of beneficial owners is essential in the fight against money laundering, corruption, but also in the fight against the financing of terrorism.

Its identification is the first step for a company to ensure that one or more current or future business relationships are not subject to sanctions, convictions for corruption and/or money laundering through their beneficial owners.

In the context of the fight against money laundering and terrorist financing, the identification of a beneficial owner may lead to additional investigations, in particular when a politically exposed person is detected among the beneficiaries.

Non-knowledge can lead to risks of sanctions for corruption, money laundering, tax fraud, as well as reputational risks that are often irrecoverable.