When Protection Of Personal Data Supersedes Anti-Money-Laundering Regulations

In May 2018, the EU Legislator adopted its 5th anti-money-laundering directive^[1] to make information on beneficial owners of companies available to any member of the general public.

As a Member State of the EU, Luxembourg implemented this directive and adopted in 2019 a law^[2] establishing a Register of Beneficial Ownership freely accessible on the internet.

Following this adoption, a Luxembourgish company and its beneficial owner both challenged the validity of this disclosure before the Luxembourg District Court on the grounds that it violates the right to respect for private life and to the protection of personal data, rights guaranteed by Articles 7 and 8 of the EU Charter of Fundamental Rights (“the Charter”).

In that context, the Luxembourgish Court made a request to the Court of Justice of the European Union (“Court of Justice”) for a preliminary ruling concerning the interpretation of the provisions of the EU anti-money-laundering directive and their validity with respect to the Charter.

In its judgement C-37/20 / C-601/20 of 22 November 2022, the Court of Justice states that any interference with a fundamental right must be based on a legal provision, must not undermine the essential content of the fundamental right, must have an objective of general interest and must be proportionate to the aim pursued.

According to the Court of Justice, granting access to the general public to information on beneficial ownership constitutes a serious infringement of the fundamental rights guaranteed by Articles 7 and 8 of the Charter. As a matter of a fact, disclosing this kind of information to an unlimited number of people could expose the subjects of the data to potential abuse. Indeed, once that data has been made available, it is impossible for the subjects of the data to protect themselves, the said data being not only freely consultable, but also retainable or massively spreadable.  

After noting that such an interference is based on a legal provision (the EU anti-money-laundering directive) and that it does not affect the essential nature of fundamental rights, the Court of Justice focuses on the objective of general interest which is also provided since the EU Legislator seeks to prevent money laundering and terrorist financing by increasing transparency and thus creating an environment less likely to be used for such activities.

However, in the interests of proportionality, the Court of Justice holds that while granting public access to the data is able to prevent money laundering and terrorist financing, it is neither limited to what is strictly necessary nor proportionate to the objective pursued.

Indeed, the previous regime provided limited access to beneficial owner information to the competent authorities, certain entities and to any person or organization having a legitimate interest. But it was dropped by the EU Legislator because the requirement of a “legitimate interest” implied practical difficulties. The Court of Justice states that the difficulty to provide a detailed definition of the circumstances and conditions under which such legitimate interest exists cannot justify public access to this information. The Court of Justice concludes that the fight against money laundering is the responsibility of public authorities and financial institutions. Making information on beneficial owners available to the public is thus not justified by a proper balance between the objective of the general interest pursued and of the fundamental rights infringed.

On these grounds, the Court of Justice rules that the provision of the new EU anti-money-laundering directive which provides that information on the beneficial ownership of corporate and other legal entities incorporated within the territory of a Member State has to be accessible in all cases to any member of the general public is invalid.

One can wonder if this European issue will ever be discussed under Swiss law. These questions should however not arise since a project of law aiming to increase transparency and facilitate the identification of beneficial owners of companies is in progress. In particular, it should provide for the introduction of a central identification register of beneficial owners, but only accessible to the competent authorities^[3].

^{[1]             Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending Regulation (EU) No 648/2012 of the European Parliament and of the Council, and repealing Directive 2005/60/EC of the European Parliament and of the Council and Commission Directive 2006/70/EC (OJ 2015 L 141, p. 73), as amended by Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018 (OJ 2018 L 156, p. 43)
[2]               Loi du 13 janvier 2019 instituant un Registre des bénéficaires effectifs (mémorial A 15) (Law of 13         January 2019 establishing a Register of Beneficial Ownership)  
[3]           Communiqué du Conseil fédéral du 12.10.2022, Le Conseil fédéral entend renforcer la transparence des personnes morales (Press releases by the Federal Council of 12.10.2022, Federal Council wishes to increase transparency of legal entities)}