Malta shuts door to beneficial owner registry as EU Court invalidates rules

Malta Business Registry follows suit after European Court of Justice rules that public access to the beneficial owner registry was an interference with privacy rights

The Malta Business Registry
The Malta Business Registry

The Malta Business Registry is limiting access to the register of beneficial owners to competent authorities and subject persons only, just days after the European Court of Justice invalidated anti-money laundering rules that allowed public access to the so-called BO registry.

The MBR, Malta’s company registrar, said subject persons can apply for beneficial access to request that their identity as owners of a company – as UBOs – is not publicly available to the public.

On 22 November, the ECJ ruled that the provisions in Directive (EU) 2015/849 which granted public access to Registers of Beneficial Owners to legal entities, were invalid, in a blow to transparency campaigners.

The ECJ said access to the BO register for companies whose ultimate beneficial owners were hidden by trusts or nominees, was an interference that was “neither limited to what is strictly necessary nor proportionate to the objective pursued.” 

Until last week, Malta operated a BO registry that gives access to undisclosed UBOs at the rate of €5 for each company. 

The 2019 anti-secrecy regulations were enacted by EU countries in recent years as a direct response to the financial improprieties disclosed by the Panama Papers, the Pandora Papers, and other similar leaks of financial data. 

The case in question at the ECJ concerned the Luxembourgish business register, which like other registries can restrict access to such information in cases when UBOs request it not to be public. In two cases, a company and its beneficial owner had unsuccessfully requested LBR to restrict the general public’s access to information concerning them.

The ECJ ruled that the general public’s access to information on beneficial ownership constituted a serious interference with the fundamental rights to respect for private life and to the protection of personal data. “Indeed, the information disclosed enables a potentially unlimited number of persons to find out about the material and financial situation of a beneficial owner,” the ECJ said. 

“Furthermore, 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.” 

The rules are intended at preventing money laundering and terrorist financing by creating, by means of increased transparency, an environment less likely to be used for those purposes.  

But the ECJ now believes that interference is disproportionate, while not resulting in any benefits in terms of combating money laundering and terrorist financing. Under current regulations, the court claimed, disclosing such information allows a potentially endless number of people to learn about a beneficial owner’s material and financial status. 

Tax equity and transparency activists argue that “beneficial ownership” may be a tool for the wealthy, but also criminals and tax cheats to disguise ownership of entities they use to hide their wealth from authorities. 

“By requiring corporations and offshore entities to publicly disclose who truly owns them, public beneficial ownership laws are designed to prevent their owners from escaping the rule of law, which can mean preventing billionaires from evading tax as well as preventing sanctioned oligarchs, organized crime and human traffickers from laundering money and financing illegal activity,” said the London-based Tax Justice Network advocacy group. 

Tax Justice Network also said the ruling occurred in the midst of EU deliberations about strengthening measures to fight dirty money entering the EU from Russia. “With public access to registers across the EU now revoked, dirty money will likely surge back into the EU,” the organisation warned. 

Roland Papp, senior policy officer of Transparency International EU, thinks European lawmaking and executive bodies can counter the Court’s decision by “guaranteeing access in the current 6th EU Anti-Money Laundering Directive,” which should also include “precise provisions that reconcile public access with privacy and security concerns.”