The November 2022 European Court of Justice judgment rejecting the wholesale implementation of public registers of beneficial ownership in the EU has caused quite a stir globally, including within offshore financial centres such as the British Virgin Islands (BVI). It might be said that the judgment justifies the BVI's well thought out, slow and steady approach to beneficial ownership information. The BVI's approach ensures maintenance of beneficial ownership information but only allows access to appropriate authorities. The approach also contemplates that such information should only be available to the general public when public access to beneficial ownership information becomes the global standard.
The European Court of Justice Judgment
The European Court of Justice (ECJ) judgment arose out a matter before the court regarding the public beneficial ownership register in Luxembourg that was challenged by the beneficial owner of a company. The ECJ ultimately held that in light of the Charter of Fundamental Rights of the European Union (the Charter), the provision of the anti-money laundering directive whereby member states must ensure that the information on the beneficial ownership of companies and of other legal entities incorporated within their territory is accessible in all cases to any member of the general public, is invalid.
Noteworthy pronouncements included in ECJ's judgment include the following:
- The general public's access to information on beneficial ownership constitutes a serious interference with the fundamental rights to respect for private life and to the protection of personal data enshrined in Articles 7 and 8 of the Charter, respectively.
- It is inherent in making that information available to the general public in such a manner that it is then accessible to a potentially unlimited number of persons. The result of this is that such processing of personal data is liable to enable that information to be freely accessed also by persons who, for reasons unrelated to the objective pursued by that measure, seek to find out about, inter alia, the material and financial situation of a beneficial owner.
- The potential consequences for the data subjects resulting from possible abuse of their personal data are exacerbated by the fact that once those data have been made available to the general public, they can not only be freely consulted but also retained and disseminated, and that, in the event of such successive processing, it becomes increasingly difficult, or even illusory, for those data subjects to defend themselves effectively against abuse.
BVI's Approach to Beneficial Ownership Information and Public Registers
The BVI's Beneficial Ownership Secure Search (BOSS) system was instituted in 2017 by virtue of a law of the same name. The BOSS system maintains beneficial ownership information on all BVI companies and limited partnerships, but the information is only accessible to certain "designated persons" under the law. The BOSS system comprises a database maintained by the registered agents of BVI companies and limited partnerships and is electronically accessible within a matter of minutes by designated persons at the BVI Financial Investigation Agency following a request by the United Kingdom National Crime Agency's Financial Intelligence Unit and other approved authorities,including the BVI Financial Services Commission, the BVI International Tax Authority, and the Attorney-General's Chambers of the BVI.
The BVI's process was deliberate; rather than jumping from one extreme to the other, the BOSS system provided a transition mechanism which could easily pivot to a full-blown public register of beneficial ownership, if necessary. In the meantime, however, it would remain in that transition state for as long as it worked effectively. The BOSS system has worked well with some changes over the past six years and is now being replicated elsewhere.
It is clear from the ECJ's judgment that it was concerned about the right to some level of privacy and protection of personal data for beneficial owners of entities, and so was the BVI when it enacted the BOSS system. It should be noted that the BVI gave a commitment to the UK to make beneficial ownership information publicly available by the end of 2023. However, in light of the ECJ's judgment which has caused the reversal of such public registers in the EU and other countries, it is an open question whether the UK will seek to hold the BVI to this commitment.
The ECJ's judgment ultimately confirms that beneficial ownership information should be maintained and be available to the appropriate persons at the appropriate time, but not to everyone at their whim and fancy, and in that regard the BVI appears to have taken the right approach on the issue.
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