BENEFICIAL OWNERSHIP TRANSPARENCY AND THE EUROPEAN COURT OF JUSTICE SOVIM RULING

European Court of Justice Sovim ruling: state of play and way(s) forward.'

The EU Global Facility just released its latest piece as part of the Beneficial Ownership Discussions Series. Related to an expert roundtable held online earlier this year, the paper delves into the critical topic of Beneficial Ownership (BO) Transparency and the Court of Justice of the European Union Sovim ruling.

The debate between BO transparency and the right to privacy, including GDPR requirements, has been a recurring theme when it comes to FATF Recommendations 24 and 25. This friction has led to various decisions and opinions from different authorities, bodies, and stakeholders.

The 4th EU AMLD in 2015 required every member state to set up BO Registers, gathering and verifying BO information to be made available to various stakeholders, including members of the general public upon the demonstration of their legitimate interest to access the information. In 2018, the 5th AMLD removed the condition of legitimate interest for the access to members of the general public, but a contentious ruling by the ECJ in November 2022 invalidated this unconditional access based on privacy rights concerns. The ECJ ruled that a legitimate interest must be demonstrated to access such information, reinstating the 4th AMLD conditionality.

To discuss the implications of the ECJ ruling, the EU Global Facility organised a Roundtable where experts shared their practical insights on the impact of the ruling on the effectiveness of BO disclosure and AML frameworks, as well as possible legal and operational solutions available to address the concerns raised by the court.

During the roundtable, experts representing stakeholders from both public and private sectors discussed various challenges, including the balance between transparency and privacy, data quality concerns in BO registers, and the importance of access to BO information for investigative purposes.

The open discussion highlighted the need for further debate and the importance of finding a long-term solution that can strike a balance between privacy rights, data protection, and the need for access to information in the fight against financial crimes.

The EU Global Facility is now working to organise sub-groups of experts to prepare documents on key topics, such as defining legitimate interests, technological solutions available to exchanging BO information, and protecting those with a legitimate interest from tipping off.

Stay tuned for more updates on this crucial topic as the European Commission, the European Parliament, and the Council are set to finalise their discussions on the upcoming AML Package.