Dublin, 25 November 2022
Earlier this week, the Court of Justice of the European Union (CJEU) invalidated a provision of the 5th EU Anti-Money Laundering Directive (AMLD5) that guaranteed public access to information on companies’ real owners. The case was sent to the CJEU from a Luxembourg court after challenges to the Luxembourg Business Registers, which disputed the compatibility of this provision with the right to privacy.
‘The CJEU has ruled in favour of privacy rights for company owners over the public interest but appears to have paid little attention to the role of public registries in enabling investigations by media and civil society organisations into alleged money laundering. This decision is extremely worrying and might be the biggest setback for the fight against corruption, organised crime and tax evasion in Europe since work began to tackle money laundering at EU level thirty years ago’, said John Devitt, Chief Executive of Transparency International (TI) Ireland.
Media and Civil Society Organisations (CSOs) have been using publicly-available beneficial ownership registries since 2018 when EU Member States were required to create them under AMLD5.
For example in 2021, the OpenLux investigation used Luxembourg’s beneficial ownership registries to highlight the role its country’s financial and corporate services sector played in offshoring wealth. The investigation also showed how companies were being used by criminal suspects to hide their ownership of companies.
Public registries have also exposed the scale of the problem posed by the enablers of organised crime and corruption to hide the identities of their beneficiaries.
A recent Bellingcat and Sunday Times investigation used the Central Bank’s register of special purpose entities to reveal that a huge number of limited partnerships had moved from the UK to Ireland on behalf of companies registered in secrecy jurisdictions such as the Seychelles and Belize. Anonymous companies appeared to be using limited partnerships in Ireland to disguise the identities of their real owners after Scottish limited partnerships were required to reveal their beneficial owners in 2017. Before the new transparency requirements, these limited partnerships had been used to launder billions of Euros in stolen state funds from Moldova, Russia and Azerbaijan, as well as to evade UN sanctions and hide the proceeds of organised crime.
‘With under-resourced law enforcement agencies, an under-regulated company registration system and the world’s third largest fund administration centre at the IFSC, Ireland is now likely to be a destination of choice for international money launderers. If we are not careful in reacting to the CJEU ruling, we are likely to see this problem run out of control.
‘If anything, we need to be doing far more to open corporate registries to the public. The information should be available to the public without charge and beneficial ownership requirements need to be extended to Irish limited partnerships. The CJEU judgement advised that those with a legitimate interest in beneficial ownership data, including media and civil society should still have a legal right to access it. And at a minimum, the RBO will need to be accessible to journalists and civil society organisations working on money laundering - that includes tax-justice NGOs working to expose tax evasion or NGOs such as TI who monitor AML compliance.
‘However, investors also have a right to know who has a controlling stake in their company and tenants should be able to know who owns the property they are renting. If that beneficial ownership data is inaccessible through the RBO, it should be made publicly available through the Companies Registration Office. Although far from perfect, the UK’s Companies House registry shows what should be done here. Information on ‘Persons with Significant Control’ is freely available to the public meaning that investors as well as regulators and civil society can quickly check the details of beneficial owners and directors along with financial statements. It has allowed TI’s chapter in the UK alongside investigators to uncover numerous cases of suspected corruption and to identify the continuing risk of money laundering.
‘Law enforcement and tax agencies just do not have the resources to detect and investigate the huge volume of suspicious transactions moving through the jurisdictions by themselves and need civil society and media to help highlight money laundering risks. Close to 40,000 suspicious transaction reports were made to the Financial Intelligence Unit (FIU) inside the Garda National Economic Crime Unit in 2021. The FIU had 17 officers responsible for reviewing these reports meaning each investigator has a potential case load of 2,000 reports to deal with each year.
‘They are increasingly dependent on leaks or cooperation with investigative journalists and civil society organisations to identify who is controlling. The Government has also admitted that it takes a ‘good faith approach’ to policing bogus filings with the Companies Registration Office meaning it’s likely thousands of companies are being used to hide the identity of the owners of illicit wealth from overseas. It’s therefore essential that data on who controls companies through their beneficial ownership of companies as well as directorships remains publicly available or that at least journalists and civil society organisations continue to have access to that information’, Mr Devitt added.
Ends
Notes to editors
Currently, the CJEU decision is pending for a third, similar case on which Transparency International submitted an informal amicus briefing.
Previously, Transparency International also documented multiple examples showing how civil society and media use of beneficial ownership data helped uncover corruption and wrongdoing, and even safeguarded EU funds – as in the case of former Czech Prime Minister Andrej Babiš.