Transparency International has sent an open letter to European Commissioner Mairead McGuinness calling for support for proposals from the European Parliament regarding transparency of ultimate beneficial owners (UBO) in the 6th Anti-Money Laundering Directive. McGuinness is European Commissioner for Financial Services, Financial Stability and the Capital Markets Union, and has done pioneering work in combating financial crime. The letter was signed by 200 representatives from academia, civil society and media organisations active in 67 countries.
The open letter is as follows:
Dear Commissioner McGuinness,
We, representatives of civil society, media and academia from across the EU and beyond, are writing to you on the eve of inter-institutional negotiations on the EU’s anti-money laundering legislative package with an urgent appeal. We call on you to explicitly support strong provisions for meaningful stakeholder access to beneficial ownership registers that were recently proposed by the European Parliament. How the co-legislators proceed on this crucial issue will determine whether or not the bloc slides back into the corporate secrecy era following last year’s adverse ruling by the EU’s highest court. With your track record of path-breaking reforms to combat financial crime, we look now to the European Commission to help ensure that the 6th Anti-Money Laundering Directive fully mitigates this risk and enables civil society actors to fulfil their watchdog role as recognised by the court.
In recent years, anonymous companies have become synonymous with money laundering, but they are also conduits of corruption, tax abuse and environmental crime. Thanks to the decades of secrecy that such opaque entities have provided, unscrupulous individuals from across the world were able to find safe haven in the EU – circumventing sanctions, evading accountability and committing further crimes with impunity.
With such widespread infractions, EU authorities alone cannot uncover all the abuses and keep up with criminals’ evolving methods. Many schemes and remaining loopholes would go undetected if not for the dedicated work of investigative journalists, activists and academics around the world.
The EU acknowledged this back in 2015 and then again in 2018 with its anti-money laundering directive, which established and then widened stakeholder access to information on companies’ real owners. The impact of these measures was just becoming visible when last November the EU Court of Justice (CJEU) delivered a surprise ruling invalidating public access provisions and reinstating the previous directive where access to beneficial ownership data was based on legitimate interest.
The legitimate interest regime under the 4th Anti-Money Laundering Directive had many flaws – which led the EU to repeal it and mandate public access in the first place. Most glaringly, member states applied different criteria when dealing with requests for such information. There were cases in which one member state would grant an applicant access, while another would reject the very same request, or data would be given to civil society organisations but not investigative journalists. Such wide discretion is prone to abuse, prejudice and regulatory arbitrage and must be safeguarded against in the 6th Anti-Money Laundering Directive.
The CJEU itself recognised that journalists and civil society organisations involved in the prevention of money laundering and its predicate offences have legitimate interest in accessing the information. This means that EU co-legislators need to now spell out the modalities to ensure that such stakeholders have, in practice, access to beneficial ownership information without having to demonstrate their legitimate interest on a case-by-case basis.
As the EU likely transitions back to requiring user registration, it is also critical to protect against risks of tipping off suspect companies as well as retaliation against journalists and activists. The existing provision that allows member states to make information relating to the author of a request, along with its legal basis, available to the company in question becomes even more problematic under a legitimate interest access regime. EU co-legislators should ensure that no data on those accessing beneficial ownership information are shared with the companies or their beneficial owners under any circumstances.
We note that the co-legislators have already agreed their positions on the pending legislation. In particular, the European Parliament has made a full suite of progressive amendments to ensure that civil society, media, academia and foreign competent authorities do not encounter barriers when seeking ownership information for anonymous companies created across the EU, regardless of where they are based. And they did so while fully respecting the CJEU ruling. Now, we look to you to match the Parliament’s ambition and unequivocally support the right of investigative journalists, activists and academics – around the world – to access the information freely and without undue restrictions.
The EU has an important responsibility to ensure that we and our allies can meaningfully contribute to efforts safeguarding EU’s financial integrity and counter the abuses committed worldwide with the help of EU companies. We urge the Commission to do its part.
You can find the entire list of representatives here.
Source: Transparency International