In 13 countries, civil society and journalists encounter obstacles or are completely unable to access information regarding companies’ real owners
For exactly a year now, journalists and civil society organisations have faced challenges accessing information on the real owners of companies across the EU. Access that had been guaranteed by the 5th EU Anti-Money Laundering Directive (AMLD5) is now curtailed in many member states since the November 2022 decision of the Court of Justice of the European Union (CJEU). The decision annulled provisions of the AMLD5 that required public access to beneficial ownership information as means to prevent and detect money laundering and predicate offences.
However, the judges were unequivocal in stating that journalists and civil society organisations have a role to play and therefore must have access to information on the real individuals behind EU companies.
It is always good to remember that beneficial ownership registers across the EU allowed journalists and activists to detect the former Czech Prime Minister’s conflicts of interest, hidden assets of politically exposed persons from Latin America and sanctioned Russian elites, among others.
Now, our assessment of the accessibility of EU beneficial ownership registers reveals that, in 13 of 27 member states, journalists and civil society representatives can either not access information or have to go through often complex requirements to prove their legitimate interest.
Immediately after the ruling, eight countries suspended public access to their registers, including access by journalists and civil society. Some of these countries have since implemented different systems to enable journalists and civil society to access beneficial ownership data, but the approaches vary greatly. Others – like Cyprus, Malta and the Netherlands – have consistently denied access, even if journalists and civil society demonstrate their legitimate interest.
And while 14 countries have maintained public registers, this does not mean that journalists and civil society can easily find out who really own companies in all these places. In Hungary, for example, access to the register depends on prior identification and payment of a fee, and it is only possible to download data one-by-one. Such accessibility barriers are very common and pre-date the CJEU ruling. Completeness and adequacy of the data is another concern, as we recently found in France.
Legitimate interest access across the EU
The CJEU ruling establishes a presumption that journalists and civil society organisations engaged in the prevention of money laundering and its predicate offences should be granted access to beneficial ownership information. This presumption is now incorporated into the text of AMLD6, proposed by the European Parliament and currently under negotiation with the European Council.
While an EU-wide rule is pending, certain member states have already taken measures to regulate legitimate interest. However, our analysis reveals that the approaches taken are diverse, highlighting the necessity for a harmonised system across the EU.
In recent months, several countries have amended their laws to define legitimate interest and regulate access. In some member states, legitimate interest must be demonstrated on a case-by-case basis, while in others, registered journalists and civil society organisations gain general access to the registers. There is also no uniform approach in defining the circumstances under which access should be granted. Some legislation mentions money laundering investigations, while others also explicitly mention predicate offences like corruption.
Ireland, for example, has implemented a highly restrictive approach. In addition to demonstrating engagement in the prevention, detection, or investigation of money laundering or terrorist financing offences – and establishing that accessing the information serves this purpose – the company subject to the access request should also be connected with persons convicted (whether in Ireland or elsewhere) of an offence involving money laundering or terrorist financing, or hold assets in a high-risk third country. Failure to satisfy this last condition is likely to result in the denial of the request. If the purpose of providing access to journalists and civil society organisations is to help detect potential money laundering and associated offences, the approach taken by Ireland seems unlikely to meet this objective.
In Italy, the government annulled provisions that determined that beneficial ownership information should be available to the public upon request and without restrictions. With the beneficial ownership register now becoming fully operational, authorities highlighted that access to data on beneficial ownership of legal entities is limited only to persons with a relevant and differentiated legal interest, similarly to what is provided for access to data and information on trusts. While the new register is centralised, members of the public requesting access to information on both companies and trusts are expected to apply directly with the relevant provincial chamber of commerce, where the information was first collected. Each chamber of commerce is then responsible for access on the legitimacy of the interest. Access will be granted only to individual company data, on a case-by-case basis. Current rules however do not include a defined criteria regarding the review of applications neither specific reference to journalists or civil society organisations.
Some states, such as Luxembourg, have instituted informal agreements with local journalists, while access remains restricted for foreign journalists and civil society. At least local journalists can register using a token and search freely in the register, without the need to confirm their legitimate interest on a case-by-case basis.
In Germany, although no new legislation has been adopted, registry authorities are analysing legitimate interest access on a case-by-case basis. Journalists and civil society organisations must first register to use the register, and their legitimate interest is then assessed. After receiving a username and password, they have to log in to the register and provide detailed information to demonstrate their legitimate interest for each request, including evidence of their professional role in the context of money laundering or predicate offences investigations. If granted, access to the actual beneficial ownership information may take anywhere from 24 hours to several weeks.
Spain has the most comprehensive response so far. At the time of the CJEU ruling, Spain still did not have a beneficial ownership register, but the Royal Decree enacted in July 2023 covers both the establishment of the register and the regulation of legitimate interest. Under the decree, media and civil society organisations that work on issues related to the prevention and fight against money laundering and terrorism financing are presumed to have a legitimate interest. As such, they simply need to show evidence of their connection to anti-money laundering and terrorism financing to the registry authority. Once the connection is attested, they can designate up to three individuals that will gain access to the register on their behalf. Access to specific information will require the payment of a fee. It is unclear however how freelance journalists will be treated.
The table below provides an overview of the approaches currently implemented by members states. (See a more detailed overview).
LEGITIMATE INTEREST ACCESS PROVISIONS ACROSS THE EU
We need a harmonised approach
It is not the first time that member states have needed to regulate legitimate interest. Under the 4th EU AMLD, beneficial ownership registers were not accessible to the public but only to those who could demonstrate a legitimate interest. At the time, this led to very diverse implementation and to challenges, in particular to journalists and civil society trying to access information.
Back in 2018, we reported on the experience of our partners in Germany when requesting information to the German Transparency Register (see page 33 of our G20 Leaders or Laggards? study). They had to provide extensive background information to justify their request. The answer sometimes took weeks and was often inconclusive, with information missing or redacted. In Cyprus, when the register was first opened, requests for information needed to be delivered in person, making it difficult for those outside of the country to request information. This is a significant problem given Cyprus’s role in cross-border money laundering cases.
Unfortunately, EU governments’ commitment to fight money laundering also varies across states. Some countries have done only the minimum, often barely meeting EU requirements when implementing and enforcing anti-money laundering provisions. Similarly, the recognition (and appreciation) of the importance of journalists and civil society organisations in the fight against money laundering, as recognised by the CJEU ruling, also varies greatly across member states. To that end, there is a risk that if member states have wide discretion to decide when journalists and civil society have legitimate interest, they may be too conservative in their approach. Access that is decided on a case-by-case basis could give governments the opportunity to protect certain individuals and companies or retaliate against certain journalists.
The lack of a harmonised approach may also lead to regulatory arbitrage. Some members states may restrict access to journalists and civil society as a means to attract investments from those looking for opaque corporate sectors. By doing so, these member states will put the whole Union at risk. We cannot afford to have the EU’s doors reopened to high-risk individuals who will take advantage of the reputation of EU companies to do business, invest and move suspicious funds.
In deciding which approach to take, the capacity of registry authorities should also be considered, particularly if requests are to be analysed on a case-by-case basis. In Germany, for example, in response to a parliamentary request, the registry authority reported that between January and September 2023, even as the register was closed to the public, there were more than 60,000 inspections from members of the public. This means that registry authorities had to analyse the legitimate interest in all those cases. The number of inspections by members of the public during 2022, when the register was opened to the public, was 295,332. The registry authority reported that 33 employees are currently responsible for reviewing registrations and applications for inspections, as well as applications for restrictions.
What should we expect next?
The 6th AMLD presents an immediate opportunity to address the CJEU ruling in a comprehensive manner. It is clear that, if left to member states, some will interpret the ruling very conservatively and leave or create the additional barriers that we see now in some places. This would go against the spirit of the CJEU ruling, which establishes that civil society and media have a legitimate interest in accessing the data. It would also go against the EU’s prior acknowledgements of the critical role that independent actors, like investigative media and civil society organisations play in fighting money laundering and promoting financial integrity.
Instead, EU rules should leave no space for countries to discriminate against public watchdogs, and oblige them to provide those whose work is connected to anti-money laundering and its predicate offences with generalised access to beneficial ownership registers. The measures proposed by the European Parliament go exactly in this direction. Now, it is critical that the Council agrees with the Parliament’s proposal as a way to address the ruling and uphold corporate transparency at the same time.
We also need to start seriously considering long-term solutions.
It is worth recalling that CJEU judges said that, in the context of the AMLD5’s stated objectives, public disclosure wasn’t justified in all cases. The ruling did acknowledge, however, that this kind of transparency would be acceptable when companies’ link with public institutions is established. So, at the very least, the EU should ensure that the real owners of companies receiving public funds across member states or donating to political parties are subject to public disclosure requirements.
We also need to look beyond anti-money laundering frameworks. Considering the potential of beneficial ownership information in a variety of other sectors, the need to bring back public access to beneficial ownership registers at the EU level becomes clear.
Source: transparency.org
