Some time ago, a judge in Luxembourg initiated proceedings at the European Court of Justice (ECJ). Subject: the UBO register (see also our earlier post in Dutch: UBO-register houdt (voorlopig) stand). Recently, the critical conclusion of the Advocate General of the ECJ in this case was published.

Background

The Netherlands (like Luxembourg and all other EU countries) has introduced a publicly accessible UBO register based on European legislation (Anti-Money Laundering Directives 4 & 5 (AMLD)). As a result, UBOs (Ultimate Beneficial Owners) must be registered in the UBO register whereas the implementation is done through the Dutch Chamber of Commerce. The deadline for submitting information on UBOs expires on March 27, 2022.

A UBO is any individual who has beneficial ownership in a legal entity. There is a UBO if there is a direct or indirect ownership or control interest of more than 25%. In addition, the senior management of an entity will have to be registered as a so-called 'pseudo-UBO' if a 'real' UBO cannot be identified.

According to the AMLD, the UBO register contributes to preventing the use of the financial system for money laundering and terrorist financing. However, because much privacy-sensitive information must be made available in the (publicly accessible) UBO register, the UBO register is far from uncontroversial.

Last year, a Dutch judge ruled, in a case initiated by Privacy First, that the UBO register did not have to be decommissioned. As a result, the Netherlands must comply with the obligations of article s 4 and 5 of the AMLD. As long as the directive is in force, the register cannot be taken out of operation. The judge also considered that there are doubts about the legitimacy of the AMLD. Reference was made to earlier proceedings that the Luxembourg court had already brought before the ECJ which are also relevant for the Netherlands. As mentioned, recently, the critical conclusion of the Advocate General of the ECJ in this case was published. With this conclusion (which is non-binding), the AG advises the European Court on the preliminary questions posed by the Luxembourg court.

Conclusion AG

The AG concludes that the UBO itself must be able to request the identity of the person who requests data from the UBO register. At present, the Dutch UBO register does not offer this option.

In addition, the AG discussed the possibility that the AMLD offers to request the blocking of certain data in 'exceptional circumstances'. According to the explanation under Dutch law, this provision can only be successfully invoked if individuals are protected by the government. However, the AG indicates that the AMLD gives a broader definition of the term 'exceptional circumstances' whereby situations in which there is a risk of 'fraud, harassment and intimidation' also should qualify. In case the conclusion of the ECJ is followed, the Dutch UBO register would not be considered to align with the AMLD.

Finally, the AG is of the view that the public disclosure of the UBO data is not in conflict with European law because of the general objective of the AMLD. This prevention objective cannot be achieved exclusively by allowing public authorities to inspect the data.

Continued

As mentioned above, the AG opinion is non-binding, which can be set aside by the CJEU. For the time being, the Dutch UBO register will therefore remain in full force and the UBO data will have to be provided to the Chamber of Commerce in a timely manner. The judgment of the ECJ is expected later this year. Based on the AG's conclusion, the AMLD are not considered unlawful. If the conclusion is followed, however, the Dutch UBO legislation must be amended in certain respects. The possible extension of the situations in which the protection of data can be requested could be a reason to already request this (if applicable).

Would you like more information?

RSM is pleased to assist you by conducting a UBO analysis based on your specific situation and can also assist you with the UBO registration. If you would like to know more about this topic and the (possible) consequences for your situation, please contact your trusted RSM advisor.