Making access to European owner registers more difficult is a big step backwards

Roland Papp: “The decision itself was undoubtedly a surprise for everyone. And it definitely set us back a few years in our efforts to strive for greater transparency and uncover money laundering.” Photo Transparency International

The European Court of Justice published a ruling on Tuesday afternoon that says public access to registers of beneficial owners of businesses violates the right to privacy. Access to records is based on the European money laundering directive, but the forms of access to them differ in individual countries.

The case under discussion arose on the basis of a lawsuit filed by the Luxembourg-based company Sovim and the natural person WM. The lawsuit contradicted the general public’s access to information about the real owners of the company and information about the ownership relationship of Mr. WM to a certain real estate company.

The Luxembourg Register of Beneficial Owners — as required by law — publishes information on owners with a stake in excess of twenty-five percent. Unlike some others, it provides online access to everyone, without restrictions. Shortly after the judgment was published, the Luxembourg government blocked access to the website.

It is Luxembourg that is the second country in the world in terms of the volume of foreign capital that flows into it. Its location, stable environment and tax benefits make it a paradise for foreign investors.

Experts dealing with tax havens consider Luxembourg to be a country where you can hide — after all, a number of investigations have shown that Russian oligarchs, world politicians and members of organized crime hide their assets in companies there. We also regularly worked with her at Deník Referendum — on investigations of real estate companies, investment funds and Daniel Křetínský’s business.

In 2018, pressure from the European Union and civil organizations resulted in the launch of a registry of real owners there. The records — like many others — were not perfect. Nevertheless, the current decision of the court is considered by journalists and experts as a fundamental step back in efforts for greater transparency and the detection of unfair financial operations.

We talked about the consequences of the decision with Roland Papp — an expert of the international organization Transparency International, who deals with illicit financial flows in the organization’s European office.

The judgment was based on a lawsuit against the Luxembourg registry. Does it therefore only concern Luxembourg, or does it set a precedent for other member states as well?

It is clearly a precedent. The court called into question a part of European legislation that applies to all states. By the way: not only Luxembourg, but also the Netherlands made the register of real owners inaccessible in response to the judgment. So we are already seeing the immediate consequences.

It is also necessary to realize that the European Union de facto sets trends in terms of transparency. The ruling thus has a far-reaching effect. For example, the island state of Jersey, one of the tax havens, has already announced that it will decide on the launch of the public register only on the basis of the judgment. So the consequences definitely cannot be underestimated.

Luxembourg, the Netherlands — do you expect other countries to follow?

I wouldn’t be surprised.

At the same time, it must be said that not all countries have introduced a publicly available register. Cyprus has been talked about for a long time.

You are right, public access has not been implemented everywhere, as you show for example in the case of Cyprus. In other countries, however, access is more difficult: in Belgium, for example, you have to register and for that you need a national identity card. Elsewhere, some data is charged for.

In the Czech register — similarly to the Luxembourg one — for example, it is not possible to search by the name of the end user of benefits. So does it even meet the definition of publicly available records?

That’s exactly the problem. True public access should mean that you put a name into a search engine, that you can work with data files that allow you to track trends, do statistical analysis, and so on. This is how it looks in Estonia, Latvia and Denmark. At the same time, it should be a generally valid standard.

So will all the efforts to make the registers more accessible now go to waste?

A new anti-money laundering directive is currently being prepared at the European level. And of course the current judgment will affect its form. Its approval is expected in the middle of next year. This means that member countries will then have two to three years to implement it.

Does this mean in practice that during the next two or three years the registers will simply not be accessible or will be difficult to access?

Apparently so. Of course, the registries will continue to function, but the question is who will have access to them — that is, whether anyone other than, for example, financial sector analysts. At the same time, the judgment recognizes in one of its parts that civil society, including journalists, has a legitimate right to access, since it is they who help uncover money laundering.

So what does that mean?

That’s a big question. For the European Union, the main task now will be to define legitimate interest. I assume he will take this as a chance to clearly define who should have access to the records.

So how much of a step back does the ruling even represent from your point of view?

The decision itself undoubtedly came as a surprise to everyone. And it certainly set us back a few years in our efforts to pursue greater transparency and uncover money laundering. In my understanding, no business is a purely private thing, but a public thing.

We have a number of cases that have shown why public registries help protect the public interest. For all of them, I can name the subsidy case of former Czech Prime Minister Andrej Babiš. However, the registries of other countries were also freely used by state authorities such as the police — now they will need legal assistance for this.

The decision is therefore also problematic for law enforcement. In a number of cases involving other countries, the judiciary, public prosecutors or the police could use the registers, but now they will need legal assistance in each given country. When the Czech police want to find out something in Luxembourg, they will suddenly have to turn to the local authorities with a request. That’s a big step back.

GABY KHAZAL


Source: Deník referendum by denikreferendum.cz.

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