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In November 2022, the Court of Justice of the European Union (CJEU) delivered one of the most important judgments in the history of European anti-money laundering legislation.
In the joined cases C-37/20 and C-601/20, the Court considered whether granting unrestricted public access to beneficial ownership registers was compatible with fundamental rights protected under European law.
The judgment has had far-reaching consequences across all EU Member States, including Cyprus, and continues to influence the development of beneficial ownership registers relating to companies, trusts and similar legal arrangements.
For trustees, family offices, corporate service providers, wealth planners and international families, understanding these decisions is essential.
Background
The European Union introduced beneficial ownership registers as part of its efforts to combat money laundering, terrorist financing, tax evasion and the misuse of legal entities.
The Fourth Anti-Money Laundering Directive (4AMLD) required Member States to establish registers identifying the beneficial owners of companies and certain legal arrangements.
The Fifth Anti-Money Laundering Directive (5AMLD) expanded these requirements significantly by providing that beneficial ownership information relating to companies should be accessible to any member of the general public.
The rationale behind this approach was that increased transparency would assist regulators, journalists, civil society organisations and the public in identifying suspicious ownership structures.
However, concerns quickly emerged regarding privacy, security and personal data protection.
The Cases
The proceedings originated in Luxembourg. Several beneficial owners challenged the legality of provisions allowing unrestricted public access to beneficial ownership information maintained in the Luxembourg Register of Beneficial Owners.
The applicants argued that making personal information available to anyone without restriction constituted a serious intrusion into their private lives.
The matters were referred to the CJEU for determination. The Court therefore had to consider a fundamental question: Can the fight against money laundering justify unrestricted public access to information regarding the beneficial owners of companies and legal structures?
The Court’s Analysis
The Court accepted that combating money laundering and terrorist financing constitutes an objective of general public interest of the highest importance. However, the Court emphasised that even legitimate public interests must be pursued in a manner consistent with fundamental rights.
The judges examined the impact of public access on rights protected under:
- Article 7 of the Charter of Fundamental Rights of the European Union (respect for private and family life); and
- Article 8 of the Charter (protection of personal data).
The Court concluded that beneficial ownership information can reveal significant details regarding an individual’s private affairs, wealth, investments and economic activities.
Public access allowed an unlimited number of persons to obtain and potentially retain, distribute or misuse that information.
The Court observed that once information becomes publicly available, beneficial owners effectively lose control over how that information is used.
Importantly, the Court noted that public access may expose beneficial owners and their families to various risks, including:
- Fraud
- Kidnapping
- Blackmail;
- Harassment;
- Identity theft;
- Other forms of criminal targeting.
The Court therefore concluded that unrestricted public access constitutes a serious interference with fundamental rights.
The Principle of Proportionality
A central aspect of the judgment was the principle of proportionality. European law requires that restrictions on fundamental rights must be:
- Necessary;
- Appropriate; and
- Proportionate to the objective pursued.
The Court found that while transparency may contribute to combating financial crime, granting access to the entire general public was not necessary to achieve that objective.
Competent authorities, financial intelligence units, law enforcement agencies and regulated entities already had access to beneficial ownership information.
The Court considered that these targeted access mechanisms provided a less intrusive alternative while still achieving the AML objectives. As a result, the Court held that granting unrestricted public access went beyond what was necessary.
The Judgment
The CJEU ultimately declared invalid the provisions of the Fifth Anti-Money Laundering Directive that granted members of the general public unrestricted access to beneficial ownership information.
The Court held that:
“Public access to beneficial ownership information constitutes a serious interference with the fundamental rights to privacy and protection of personal data and is not proportionate to the objective pursued.”
The judgment immediately affected beneficial ownership regimes across the European Union. Many Member States suspended public access to their registers or introduced restrictions while reviewing their legislative frameworks.
Why the Judgment Matters for Trusts
Although the cases directly concerned corporate beneficial ownership registers, their implications extend far beyond companies.
The reasoning applies equally to trust beneficial ownership registers, including registers relating to:
- Express trusts;
- Family trusts;
- Asset protection trusts;
- Private trust companies;
- Foundations;
- Similar legal arrangements.
Trust structures frequently involve highly sensitive family information, including succession planning, wealth preservation, vulnerable beneficiaries and charitable objectives.
The Court’s judgment reinforces the principle that transparency requirements must be carefully balanced against legitimate privacy interests.
This is particularly important in the trust context, where confidentiality has historically been one of the defining features of trust law.
Impact on Cyprus
The judgment has significantly influenced the development of Cyprus’ beneficial ownership framework. When considering access arrangements under the Register of Beneficial Owners of Express Trusts and Similar Legal Arrangements (CyTBOR), CySEC and other authorities must ensure that any disclosure mechanisms comply with the principles established by the CJEU.
The concepts of proportionality, necessity, data protection, and privacy rights have become central considerations in the design and operation of beneficial ownership registers.
This influence can clearly be seen in more recent regulatory developments concerning Cyprus trust transparency requirements.
The Position Today
The judgment did not abolish beneficial ownership registers. Nor did it eliminate reporting obligations imposed on trustees, corporate service providers, companies or regulated entities.
Instead, the judgment established an important principle: Transparency must not come at the expense of fundamental rights.
Beneficial ownership information remains accessible to competent authorities and regulated professionals who require it for legitimate anti-money laundering purposes.
What has changed is the recognition that unrestricted public access is not automatically justified.
The joined cases C-37/20 and C-601/20 represent a landmark moment in the development of European transparency law.
The Court confirmed that combating money laundering remains a vital public objective, but also reaffirmed that privacy and data protection are fundamental rights that cannot be ignored.
For trustees, family offices, wealth planners and fiduciary service providers, the judgment provides an important reminder that compliance and confidentiality are not mutually exclusive.
At AGPLAW, our Trusts & Private Client team regularly advises trustees, family offices, protectors, settlors and high-net-worth individuals on trust structuring, beneficial ownership compliance, privacy considerations and regulatory developments affecting wealth planning structures in Cyprus and internationally.
The information provided by AGPLAW | A.G. Paphitis & Co. LLC is for general informational purposes only and should not be construed as professional or formal legal advice. While every effort has been made to ensure the accuracy and reliability of the information contained herein, no representation or warranty is given. In no event will the author or any related parties be liable for any loss arising from reliance on this article.
