Access to beneficial ownership registers: moving closer to a “legitimate interest” test

Insight

14.02.2024

In December, the initiative for unrestricted public access to beneficial ownership registers received another setback. The Crown Dependencies of Jersey, Guernsey and the Isle of Man, and also the Overseas Territories of the British Virgin Islands and the Cayman Islands, declared that they will not grant unrestricted public access to their beneficial ownership registers following the judgment in WM & Sovim SA v Luxembourg Business Register, 2022 EUR-Lex - 62020CJ0037 (the EU Judgment). This was not unexpected but confirms for those with international private wealth structures that unrestricted public access to beneficial ownership registers is unlikely to become an international standard.

Readers may be familiar with the EU Judgment, a landmark November 2022 case heard by the EU’s highest court (the CJEU) in which the CJEU held that the public disclosure of information held on beneficial ownership registers would, if implemented, breach individuals’ rights to privacy. In the EU Judgment, the CJEU held that provision for public access to beneficial ownership registers in the European Union as envisaged under the Fifth Money Laundering Directive (5MLD) would interfere with individuals’ fundamental rights to privacy as enshrined in Articles 7 and 8 of the Charter on Fundamental Rights.

Background: the proposed expansion of the transparency regime

Most of the Overseas Territories and Crown Dependencies have implemented beneficial ownership registers and this information is made available to law enforcement agencies. The UK and Gibraltar have publicly accessible beneficial ownership registers. In the UK this is also known as the “Persons with Significant Control” or PSC regime, introduced in 2016.
In 2018, the UK Parliament passed legislation requiring the UK Government to prepare a draft order in council by 2020 instructing the Overseas Territories to make their beneficial ownership registers available for unrestricted public access. Such orders in council are the mechanism for implementing legislation in the Overseas Territories and the UK Government announced an intention to implement the draft order in council by the end of 2023. Currently, Gibraltar is the only Overseas Territory with unrestricted public access to its beneficial ownership register.
In 2019, the Crown Dependencies agreed to align their beneficial ownership registers with the EU and UK, making them available for unrestricted public access as envisaged by 5MLD. This project was paused following the EU Judgment.

December 2023: the announced changes

Following the EU Judgment, many Overseas Territories and Crown Dependencies announced that they would put plans for unrestricted public access to beneficial ownership registers under review.
The Cayman Finance Minster announced, in late November, that the EU Judgment represented a “material change in circumstance” and that the Beneficial Ownership Transparency Bill going through the Cayman Parliament would not include public access provisions. Access may be granted to certain parties meeting a legitimate interest test.
On 8 December 2023, the BVI Government issued a press release stating that public access to beneficial ownership registers must, following the EU Judgment, be restricted to those who can demonstrate a legitimate interest in the information to protect “fundamental human rights” to privacy.
On 13 December 2023, the Crown Dependencies jointly announced that they would also not make their beneficial ownership registers available to the general public with unrestricted access and would similarly permit access to information on the registers only to those who can demonstrate a “legitimate interest” in the requested information.
References to a “legitimate interest” test in both announcements is consistent with the anticipated Sixth Money Laundering Directive (6MLD) regime. More on this below.

What next?

In the first half of 2023 the European Parliament approved a proposal to progress a 6MLD, the text of which is due for publication in the coming months.

The 6MLD is widely expected to include a legitimate interest test for public access to beneficial ownership registers. The EU Judgment indicated that public access to beneficial ownership registers might be permissible for those who can demonstrate a legitimate interest in the requested information: similar language to that used in the announcements by the BVI and the Crown Dependencies in December.

That said, the European Commission argued before the CJEU that it would be impossible to find a workable definition of legitimate interest that is capable of general application across the EU, so it will be very interesting to see how the Commission proposes to address this issue in the text of the 6MLD. It will also have direct impacts on wealth creators and their families: for example, we wait to see the extent to which journalists and media organisations will be permitted to access these registers. Another impactful aspect of this will the implementation of a legitimate interest test: how decisions are made as to whether there is legitimate interest for access and who decides.

This will be an area to watch closely over the course of 2024.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.