A ruling of the Court of Justice of the European Union (CJEU) has put in doubt the future of corporate transparency standards across the EU. This follows revelations that public access to Ultimate Beneficial Ownership (UBO) registers is a violation of privacy and data protection.
In the Court’s opinion, the policymaker’s intent to prevent money laundering and financing of terrorism crosses the boundary marked by the basic rights to respect for private life and the protection of citizens’ personal data, enshrined in Articles 7 and 8 of the European Charter.
In the aftermath of the decision, the European Commission and the European parliament will have to amend current legislation to reflect the court’s decision. While this process will likely take at least a few months, governments have already started removing public access to their registers to protect themselves against potential legal repercussions down the line. On November 25th, Austria, the Netherlands, Belgium, and Luxembourg had already taken their databases offline.
Even before the November 2022 ruling, the patchy implementation of the UBO register requirement caused various challenges. Issues arose not only across jurisdictions, but also at a local level, as governments often lacked resources, incentives, or deterrents to ensure that all required companies filed their UBO information.
Establishing consistent standards in corporate transparency and disclosure across the EU, as well as providing licensed or public access to registries listing UBO’s of corporations are some of the most important steps the EU can take in helping the detection and combatting of corporate fraud and preventing bad actors from hiding behind complicated structures and shell companies.
