The UK government has concluded that its new register of overseas entities and the register of persons with significant control are both compliant with the European Convention on Human Rights.
The declaration follows a decision by the Court of Justice of the European Union in November 2022 that public beneficial ownership registries in the EU infringed Articles 7 and 8 of the union’s Charter of Fundamental Rights, which protect personal data and privacy.
The articles of the EU charter are equivalent to Article 8 of the European convention. The Cayman Islands has been subject to the convention, through the UK, since the 1950s.
The EU court recognised the AML directive pursued a general interest objective, in terms of countering money laundering and financial crime, that could justify interferences with fundamental privacy and data protection rights.
But the court found that unfettered public access, without the need to demonstrate a legitimate interest, was neither limited to what is strictly necessary, nor proportionate to the objective pursued, given that law enforcement and tax authorities already have the information.
Like the European public registers, which have now been declared invalid, the UK registers, available through Companies House, make the details of beneficial owners of companies available to the public free of charge.
Public access a deterrent
In a policy paper, the UK government has declared that, having reviewed its legislation in light of the EU court’s decision, its public registers are compliant with the clauses of the European convention.
Although the UK government acknowledged that public registers interfered with article 8 of the convention, it said such intrusions were limited, proportionate and necessary in a democratic society for the prevention and detection of crime.
In contrast to the EU court, the UK government believes that removing the need to demonstrate a legitimate interest, as it has done for the register of overseas entities, would act as a deterrent to financial crime.
“The repeal of the filter [of having to demonstrate a legitimate interest] is also justified because the Government considers it possible that its retention dissuades members of the public from exercising the right of access, because they do not wish to disclose their reasons for seeking access or are concerned about become involved in a legal dispute with the company about their motivations,” the policy update said.
As such, having to show a proper purpose for accessing beneficial ownership data risks undermining transparency and thus the public interest benefits that go with it, it added.
Under UK regulations, beneficial owners can also apply to suppress certain information from the public register, if they can demonstrate that they or a member of their household will be at serious risk of being subjected to violence or intimidation if information about them is disclosed.
The UK believes “this is a significant safeguard” that will ensure that the disclosure regimes of its public registers do not unjustifiably establish blanket intrusions into the rights protected by Article 8.
Cayman government obtains legal advice
The Cayman Islands government has commissioned its own legal advice on the implications of the EU court’s decision for plans to make the beneficial owners of companies and other Cayman-based entities public.
Cayman agreed to a central register after UK legislation threatened to impose an order in council, effectively legislating on behalf of the islands, if Cayman and other UK Overseas Territories did not act on their own accord.
In October 2019, the Cayman Islands government committed to a public register by 2023, provided the EU and the UK have introduced similar registers by then.
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