The UBO register in the bin following the ruling of the Court of Justice of the EU? (UBO 1)

WHAT IS THE UBO REGISTER AGAIN AND WHY WAS IT INTRODUCED?

Since the late 1980s, the intergovernmental organization Financial Action Task Force (FATF) has made recommendations to combat money laundering (and later the financing of terrorism). Over the past decades, this has resulted in (mainly) European “Directives” that were transposed into national legislation. The resulting Wwft (see my previous articles for further explanation) includes three core obligations for Wwft-obliged institutions;

Client investigation
Monitoring of transactions
The reporting of Unusual Transactions (UT) to the FIU.

The UBO register was therefore introduced to map money launderers, fraudsters, and terrorists and to be able to detect their interests.

In this article I will only address the first core task of Wwft-obliged institutions. Within the framework of client investigation, institutions must determine who the Ultimate Beneficial Owner (UBO) of legal entities is. Since the adoption of the 4th and 5th Anti-Money Laundering Directives in 2015 and 2017 respectively, it has been enshrined in Dutch law that the UBO must be identified and registered in a publicly accessible register. In the Netherlands, the registration is assigned to the Chamber of Commerce.

THE REGISTER IN PRACTICE

Anyone who has read the newspapers will have noticed that this registration, throughout Europe, has led to much controversy. Not only were there principled, privacy-related objections to its introduction, but it also repeatedly appeared that the implementing body, the Chamber of Commerce, was not up to its task, and enforcement is still lacking due to enormous backlogs in registration. In addition, in my opinion, the entire registration largely misses its objective, because when no UBO can be identified according to the definition (25% ownership), the person who exercises actual control (usually the director) is registered as UBO, the so-called “pseudo UBO”.

THE RULING OF THE EU COURT

The ruling of the Court of Justice concerns exclusively the violation of the privacy of EU citizens. The register is (but by now was) fully public. The only concession that the House of Representatives managed to enforce was that anyone consulting the register would be registered, so that this could be requested by the registered person. The EU Court has now ruled that there is a lack of convincing evidence that such openness is necessary. The Court recognizes the importance of registration, the importance of access by enforcement authorities (and other gatekeepers, which is still a question?), and also the importance of access by journalists, scientists, and civil society organizations to expose wrongdoing, but total openness? On that point, the EU Court clearly says: no.

CONCLUSION

The UBO register is not going into the trash. But the EU Court forces European and national governments to adopt more precise legislation. In doing so, the EU Court follows a line already initiated with the Treaty of Lisbon in 2009, which brought the Charter of Fundamental Rights of the EU into force. Since then, the EU Court has developed strong “fundamental rights jurisprudence,” with the principle: no violation of the privacy of European citizens, unless. The European Trias Politica therefore appears to function excellently, and in my opinion, that is very encouraging.