Irish Region

On 22 November 2022, the Court of Justice of the European Union (CJEU) published a decision affecting European member states national beneficial ownership registers (Decision).   The CJEU found a provision under the Fourth Anti-Money Laundering Directive (AMLD4), as amended by the Fifth Anti-Money Laundering Directive (AMLD5), to be invalid. 

The Decision will impact (re)insurers, particularly direct life insurers.  The Decision has led to the closure of several EU national registers, including the Register of Beneficial Ownership (RBO) operated in Ireland by the Companies Registration Office.

KYC Checks 

While the impact of the Decision is expected to be addressed in the near term and will only cause temporary closures, at present it affects regulated undertakings seeking to carry out standard KYC and policyholder on-boarding processes.   As designated persons, bodies such as life insurers have a legal obligation to check the relevant beneficial ownership register to establish the ultimate owners of a proposed counterparty.   With access suspended, there are obvious administrative difficulties that this causes. 

Decision

The Decision was made in relation to the Luxembourg register but it has a broader impact, including in Ireland.   Under AMLD4, all member states were required to implement domestic legislation requiring entities to hold information on their beneficial owner(s) and to establish a central register with this information.  AMLD4 provided that "any person or organisation that can demonstrate a legitimate interest" can access beneficial ownership information for corporates and other legal entities.  AMLD5 extended this general access dimension by providing that "any member of the general public" can access the information.  It is this broadening of access that has been struck down by the CJEU.

Companies and individuals in Luxembourg whom the local register had refused to exempt from the publication of their details, appealed the position.  The Luxembourg court asked the CJEU to consider whether access to the public databases, as currently constructed, were a violation of fundamental privacy and personal data rights.   This led to the Decision, with the consequence that relevant current national approaches are invalid.

Legitimate Interest

A key consideration of the court in reaching the Decision was the movement away from only permitting access on the narrower "legitimate interest" grounds under AMLD4.  Although casting down the breadth of general access to the registers, the CJEU did not outline a new test that must be satisfied. However, the EU Parliament has since noted that it is of key importance that access to the registers is not affected. Access to the RBO has since been restored for Revenue officials, An Garda Síochána and other State agents but with limited if any information now available to the public.

Central Register of Beneficial Ownership of Trusts 

The decision does not impact the separate Central Register of Beneficial Ownership of Trusts (CRBOT) in Ireland. This is related to a separate EU regime regarding the ultimate owners of trusts.  The CRBOT is maintained by the Revenue Commissioners. The requirement to demonstrate a "legitimate interest" before being granted access to information on the CRBOT register means access has never been as broad as with the RBO.

Published by William Fry LLP on 18 December 2022