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In Parliament last week, the Deputy Premier and Minister of Financial Services, André Ebanks, discussed details of the Beneficial Ownership Transparency Bill 2023 (the “Bill”) that he would like the legislature to pass into law to “proactively assist the Cayman Islands and preparation for the fifth round of the FATF evaluation process” starting for all countries in 2025. He also explained that the amendments were necessary to fulfil specific commitments made by the Cayman Islands Government with the United Kingdom to allow public access to beneficial ownership registers.
Regarding commitments with the United Kingdom, the Deputy Premier explained:
Following an Exchange of Notes agreement entered into with the United Kingdom on the sharing of beneficial ownership information in 2016, legislation was introduced in 2017 requiring companies to provide beneficial ownership information to the Registrar of Companies which altered the Companies Act.
These requirements were subsequently extended to limited liability companies and more recently to limited liability partnerships and other business vehicle legislation.
He added:
In October of 2019, the Cayman Islands made a commitment to introducing public registers of beneficial ownership information when it became a global standard.
The 2019 commitment was made in response to evolving standards.
Concerning this, he explained that “The United Kingdom had produced a Draft Overseas Territories Publicly Accessible Registers of Beneficial Ownership Information of Companies Order 2020″, which was “drafted but not enacted.”
This was done “to comply with the requirement under section 51 of the UK’s Sanctions and Anti Money Laundering Act 2018.”
These plans would later be impacted by a judgment of the European Court of Justice on November 22, 2022.
This judgment, according to a press release issued by the European Court of Justice, stated as follows:
In today’s judgment, the Court, sitting as the Grand Chamber, holds that, in the light of the Charter, the provision of the anti-money-laundering directive whereby Member States must ensure that the information on the beneficial ownership of corporate and other legal entities incorporated within their territory is accessible in all cases to any member of the general public is invalid.
According to the Court, the general public’s access to information on beneficial ownership constitutes a serious interference with the fundamental rights to respect for private life and to the protection of personal data, enshrined in Articles 7 and 8 of the Charter, respectively.
Indeed, the information disclosed enables a potentially unlimited number of persons to find out about the material and financial situation of a beneficial owner. Furthermore, the potential consequences for the data subjects resulting from possible abuse of their personal data are exacerbated by the fact that, once those data have been made available to the general public, they can not only be freely consulted, but also retained and disseminated.
The press release added:
In addition to the fact that the provisions at issue allow for data to be made available to the public which are not sufficiently defined and identifiable, the regime introduced by the anti-money-laundering directive amounts to a considerably more serious interference with the fundamental rights guaranteed in Articles 7 and 8 of the Charter than the former regime (which provided, as well as access by the competent authorities and certain entities, for access by any person or organisation capable of demonstrating a legitimate interest), without that increased interference being capable of being offset by any benefits which might result from the new regime as compared against the former regime, in terms of combating money laundering and terrorist financing.
In particular, the fact that it may be difficult to provide a detailed definition of the circumstances and conditions under which such a legitimate interest exists, relied upon by the Commission, is no reason for the EU legislature to provide for the general public to access the information in question.
The European Court of Justice having taken the position that the general public’s access to information on beneficial ownership constitutes a serious interference with the fundamental rights to respect for private life and to the protection of personal data, enshrined in Articles 7 and 8 of the Charter, the Deputy Premier said his ministry “sought expert legal and constitutional advice on public registers and had to engage with the UK’s Foreign Commonwealth and Development Office in view of the 2019 commitments.”
Regarding this legal advice, he explained:
Acting on the advice of Constitutional Council, the bill contains a clause at 22(6), a specific provision to permit the Cabinet to make regulations to provide constitutionally permissible public access. Because the ECJ judgement outlines a limited window in which public access may not be a disproportionate interference with privacy rights, certain parties who may meet a legitimate interest test in broad terms.
Those persons who have a genuine need to seek information so as to prevent or combat money laundering or terrorist financing, A requester, for example, who shows that they’re involved in an investigation into money laundering and terrorist financing.
He added: “Crucially, creating such regulations under clause 22(6), should the bill be passed, will have to be subject to an affirmative resolution in this House, which means that the relevant provisions will be ring-fenced and cannot commence until affirmed by a resolution of this Parliament.”
He said further that this “means that there will be ample time for a public consultation… to take on board feedback and their views on any such regulations.”
It is hoped that such consultation will also include hedge fund investors outside the Cayman Islands who may have a view of the implications and scope of the BIll, bearing in mind the ECJ’s judgment the general public’s access to information on beneficial ownership constitutes a serious interference with the fundamental rights to respect for private life and to the protection of personal data, enshrined in Articles 7 and 8 of the Charter.
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