Financial Crime World

Luxembourg Court Rules Against Beneficial Ownership Transparency in Luxembourg

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The European Union’s highest court, the Court of Justice, has delivered a landmark judgment ruling that a provision requiring companies incorporated within the territory of EU member states to disclose information on their beneficial owners to the general public is invalid.

Background

As part of the anti-money laundering directive, a provision was introduced requiring companies to disclose information on their beneficial owners. This provision aimed to increase transparency and prevent money laundering and terrorist financing.

The Court’s Ruling

The Luxembourg Business Registers, which administers a register of beneficial ownership, had been required to make this information available to the general public, including through the internet. However, the court ruled that:

  • The provision constitutes a serious interference with the fundamental rights to respect for private life and protection of personal data enshrined in the European Charter.
  • The information disclosed enables an unlimited number of persons to find out about the material and financial situation of beneficial owners, potentially leading to abuse of their personal data.

The court found that the provision was neither limited to what is strictly necessary nor proportionate to the objective pursued. It ruled that:

  • The interference with fundamental rights is not justified.
  • The regime introduced by the anti-money laundering directive amounts to a more serious interference with fundamental rights than the former regime, without providing any benefits in terms of combating money laundering and terrorist financing.

Implications

The court’s ruling has significant implications for companies incorporated within the territory of EU member states. These companies will no longer be required to disclose information on their beneficial owners to the general public. The judgment is binding on other national courts or tribunals before which a similar issue is raised.

Key Points

  • Companies in EU member states will no longer be required to disclose information on their beneficial owners.
  • The provision was deemed invalid due to excessive interference with fundamental rights.
  • The judgment has implications for combating money laundering and terrorist financing, as the court found that the regime did not provide sufficient benefits.