January 31, 2023
Different countries have always handled the reporting of ownership in business entities that are subject to their jurisdiction in different ways. However, there is a growing trend towards requiring entities to report who has control over them in order to prevent illegal activities from occurring. This trend can most visibly be seen in the legal battels occurring in the European Union as well as the requirements in place in the United Kingdom and proposed regulations in the United States that will likely take effect in the coming years.
Until recently, legal entities incorporated in the European Union were required to disclose any beneficial owner to a publicly accessible registry as part of the European Union Anti-Money Laundering Directives. A beneficial owner is a natural person who directly or indirectly exercises control over the entity. On November 22, 2022, the Court of Justice of the European Union invalidated this publicity in WM & Sovim SA v. Luxembourg Business Registers. It was ruled to violate the privacy rights (articles 7 & 8) protected by the Charter of Fundamental Rights of the European Union. The Court acknowledged this law’s purpose as germane yet held that it was not “strictly necessary to prevent money laundering and terrorist financing.” This does not limit the government’s access, but does remove the public’s ability to view this information.
