Pursuant to the fourth and fifth anti-money laundering directives, all EU-member states were obligated to set up a register containing information of the ‘ultimate beneficiaries’ (ultimate beneficial owners, or UBOs) of locally incorporated legal entities. The directive was implemented by the Netherlands in 2018 and the register entered into force on 27 September 2020.
The Dutch legal entities that fall within the scope of the UBO-register are general or professional partnerships, limited partnerships (CV), foundations and associations, Private Limited Companies (BV) and Public Limited Companies (NV).
The information included in the register relates to the participant and/or stakeholder in the legal entity and the person that has effective control over the entity. This UBO must be registered with the administrator of the register, which is the Dutch Chamber of Commerce (KvK). The UBO-register also has to meet the requirements for data protection and the General Data Protection Regulation (GDPR). Under current rules, anyone could access the UBO-register for a fee after registering and identifying themselves online. The public information that could be requested included:
- First and last name;
- Month and year of birth;
- Nationality;
- State of residence; and
- Nature and size of the economic interest held by the UBO.
Personal data about the UBO, such as the citizen service number and date of birth, home address and copies of passport or ID are included in the register, but are not accessible for the public. An exception applies to various governmental agencies such as the Public Prosecution Service and the Financial Intelligence and Investigation Service (FIOD).
Purpose of the UBO-register
The purpose of the UBO register is to fight financial- and economic crime by creating transparency on who has a significant interest in a company. For example, the FIOD can consult the UBO-register and use the registered information to investigate tax fraud and thus reducing criminal activities such as fraud, money laundering and the financing of terrorism. In addition, it was also possible for anyone to request the public information of the UBO of (almost) every company against payment. This information could then be shared without limitation.
Judgment CJEU
Following preliminary questions from a Luxembourg court about the fourth anti-money laundering directive and its interpretation, the European Court of Justice (CJEU) has ruled on the compatibility of the UBO-register with the right of respect for private life and the right to protection of personal data.
The Court ruled that public access constitutes a serious interference with the right to respect for private life and the right to the protection of personal data. As these rights are part of the European fundamental rights, restriction can only be justified if the measure pursues an objective of general interest, and the measure is necessary and proportionate. The Court concluded that the restriction of these fundamental rights through public access goes beyond what is necessary and is not proportionate to the aim of the Directive.
Based on the ruling, it can be argued that unlimited public access to UBO-information is in violation with EU law.
Letter from Minister of Finance
In response to the ruling of the CJEU, Finance Minister Kaag sent a letter to the House of Representatives in which the minister outlines the consequences for the Netherlands. Although the situation in the Netherlands differs from that in Luxembourg, the minister states that the ruling does give cause to investigate the provision of information regarding UBOs. In that context, the CoC has been asked to temporarily stop providing information from the register immediately. Please note that the ruling has no further impact on the obligation for legal entities to register their UBOs.
Conclusion
The obligation to register for the UBO-register remains in place, however a threshold has now been introduced for access to the registered information. From now on, access is limited to persons or organizations with a legitimate interest. This term is broad and vague, but it is expected that it will be clarified by legislation and the competent courts in due course.
Should you have any questions on the UBO-register or if you could use some support in registering the UBO-information, do not hesitate to contact to contact us.
