Ebb and Flow between Privacy and Transparency

Ebb and Flow between Privacy and Transparency

For the past 70 years the Bermuda Monetary Authority has maintained a beneficial ownership register (“BO Register”) which currently contains information such as the name, address, passport number, date of birth, and percentage of shareholding, of the beneficial owners of approximately 15,000 companies in Bermuda.  

For now, this information is only accessible to tax and law enforcement agencies; and it is understandable, in this day and age where data protection is of the utmost importance, why only a limited number of vetted and responsible authorities have access to potentially sensitive personal information.

Under the 5^th Anti Money Laundering Directive (“AMLD”), the EU proposed that its member states would be required to make their respective beneficial ownership registers fully accessible to the public. Previously, under the 4^th AMLD, information contained within beneficial ownership registers was only accessible to members of the public who could show a legitimate interest in such information.  

In 2020, in preparation for the implementation by the EU of the 5^th AMLD, the Government of Bermuda announced its intention to make the information stored on the BO Register accessible to the general public. In making the announcement, Bermuda followed the lead of other comparable jurisdictions such as Jersey, Guernsey, the Isle of Man, and the Cayman Islands, all of which made similar commitments. It was reported that the Government’s intended implementation of the publicly accessible BO Register would be contingent on such a policy becoming a global and international standard.

In a pivotal judgement handed down by the Court of Justice of the European Union (“CJEU”) on 22 November 2022, the CJEU addressed the validity of the 5^th AMLD which requires EU member states to make their respective beneficial ownership registers accessible in all cases to any member of the general public and found that the 5^th AMLD was invalid.

In its decision, the CJEU stated that the general public’s open access to beneficial ownership information constituted a serious interference with the fundamental rights regarding respect for private life and the protection of personal data, which are enshrined in Article 7 and 8 respectively of the Charter of Fundamental rights of the European Union.

The CJEU highlighted the fact that the information that would be available under the policy of the 5^th AMLD would enable a potentially unlimited number of persons to find out about the material and financial situation of a beneficial owner; and the possibility of abusive consequences resulting from such access would be immeasurable. The potential abuse of their personal data is exacerbated by the fact that, once that data has been made available to the general public, it can be freely retained and disseminated by third parties.

Although the CJEU ruled against public access to beneficial ownership registers, it is clear from the judgment that the CJEU considers the prevention of money laundering and terrorist financing as an objective of significant importance and one that might justify a certain level of interference with fundamental rights of privacy and protection of personal data. However, on the other hand, it is also clear from the judgment that the CJEU believes that such interference needs to be limited to what is strictly necessary and proportionate to the objective pursued.

In general, the UK courts (and, by extension, as a British Overseas Territory, the Bermuda courts), are not bound by any principles or decisions made by the CJEU after 31 December 2020 following the UK’s exit from the European Union. Instead, the UK courts may ‘have regard’ to any decisions made by the CJEU, but only as persuasive precedent.  

Whilst the decision of the CJEU may not have direct legal implications for Bermuda, the practical implications are immense. The judgement has blocked the concerted efforts to make beneficial ownership information publicly available and it may provide further encouragement for those opposing the interference by public bodies based on the fundamental right to privacy.

For now, the choice to proceed with public access to Bermuda’s BO Register remains in the hands of the Bermuda Government, but without this becoming the global standard it is difficult to see Bermuda going in that direction any time soon.  Although delayed for now, the implementation of  public access to beneficial ownership information has certainly not gone away for good. It remains to be seen how future AML directives will evolve in an effort to secure public access to beneficial ownership registers in situations that test the boundaries of legitimate interest. Without clear guidance, the regulatory tides of compliance will continue to ebb and flow between privacy and transparency, leaving much uncertainty in their wake.