Transparency of beneficial ownership information has been a political issue since June 2013 when UK Prime Minister David Cameron first demanded British Crown Dependencies (CDs) and Overseas Territories (OTs) introduce open registries. The Fourth Anti‐Money Laundering Directive (4AMLD) stopped short of requiring public central registers. However, the Fifth Anti‐Money Laundering Directive (5AMLD) requires the implementation of publicly accessible central registers and for those registers to be linked at an EU level through a central European platform. Political pressure has remained upon the CDs to follow suit. So, what is the position?
Jersey has maintained a non‐public central register of beneficial ownership information since 1989 and many other British Territories have since 4AMLD introduced such registers. In 2018, the UK Parliament passed the Financial Services (Implementation of Legislation) Bill requiring the government of any British overseas territory to implement public registers by the end of 2020; this has been rescheduled for 2023. Originally, this Bill was also due to be applicable to the CDs, but that proposition was retracted at the last minute owing to the CDs' different constitutional relationship with the UK.
The CD's have long been committed to meeting global regulatory standards, including transparency of ownership and have recently applied additional focus in this area. In June 2019, the CDs acknowledged the movement towards implementing public registers of ownership across the EU and set out three stages consistent with the EU's approach to transparency under 5AMLD. The stages are an evolution of the current position and include:
- the interconnection of the CDs' registers of beneficial ownership of companies with those within the EU for access by law enforcement authorities and financial intelligence units; then
- access for financial service businesses and certain other prescribed businesses for corporate due diligence purposes; then
- public access aligned to the approach taken in 5AMLD.
The EU plans to implement public access from 2022, following an implementation review. This position is consistent with the CD's stance that it would adopt similar measures. Therefore, the CDs are looking to make their central registers public once the EU's implementation review is conducted, as and when they become an internationally recognised standard, ideally by 2023. However, this timeframe may differ depending on the result of the EU's implementation review and the speed at which public central registers become an internationally recognised standard.
In that regard, France introduced a public register of trusts pursuant to the 4AMLD. In 2016, the French Constitutional Council held it was unconstitutional because its access was not sufficiently restricted and consequently, access to the register was restricted to 'competent authorities'.
5AMLD justifies public access to personal data on central registers (e.g. good corporate governance, greater civil scrutiny and the fight against terrorism) and says it 'respects the fundamental rights and observes the principles recognised by the Charter of Fundamental Rights of the European Union (CFR), in particular ... the right to the protection of personal data.' However, there still seems to be the potential for a battle between the EU and the European Court of Human Rights (ECHR) on data protection and privacy. The minimum personal data required to be filed on a public central register is fundamental personal data.
It is currently unclear if non‐European countries will introduce public registers. The Common Reporting Standard (CRS) became internationally adopted (excluding the US), so, it stands to reason that public registers might also become an international standard by 2023 (presumably, still excluding the US). If so, there would be no sign of transparency stopping.
5AMLD's transparency does not dramatically change what industry practitioners will have to do from an 'obliged person' perspective, but it does change the environment within which clients' structures will operate. The latter change is where discussions with clients will need to take place to understand clients' appetite for transparency of their personal data.
Furthermore, practitioners will likely be put under pressure and risk to ensure central registers contain up‐to-date and accurate information on beneficial owners. This is likely to further increase compliance costs. It also seems likely that practitioners will be subject to new penalties to ensure central registers contain only adequate, accurate and current beneficial ownership information.
By 2025, public registers may be the norm across all reputable international finance centres.
First published in the STEP Journal October 2019
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