ECJ declares EU Money Laundering Directive to be partially illegal

The EU’s “Fifth Money Laundering Directive” (Directive (EU) 218/843) takes further measures in order to combat money laundering and terrorist financing. In a recent decision, the European Court of Justice (ECJ) has now ruled that the Directive is partial unlawful due to the disproportionate interference with the European Charter of Fundamental Rights (CFR).

The ECJ decision of November 22, 2022 (C-37/20 and C-601/29) focuses in particular on the regulation according to which information on the beneficial owner must be available to all members of the public (Art. 30 (5) of the EU Money Laundering Directive 2015/849 as amended by Art. 1 No. 15g of the amending directive (EU) 2018/843).

The dispute was submitted to the ECJ by a Luxembourg court which had to decide on the legality of a law on the registration of beneficial owners, by means of which the Directive was implemented, and which had been adopted in Luxembourg in 2019. The plaintiffs requested to restrict access to sensitive data as they, due to public accessibility, were concerned about their own and their families’ safety.

The ECJ considered the facts of the case in particular by examining whether the regulation was compatible with the respect for private and family life (Art. 7 CFR) and the protection of personal data (Art. 8 CFR). It ultimately concluded that the regulation constituted a severe interference with the concerned parties’ fundamental rights. Furthermore, taking into account the regulation’s purpose, i.e., combating money laundering and terrorist financing, the regulation was not restricted to the necessary extent and was not proportionate. Thus, the Fifth Money Laundering Directive did not contain any relevant advantages compared to the previous Fourth Money Laundering Directive. Furthermore, the exception excluding accessibility in certain cases was not suitable for ensuring sufficient protection of personal data either.

As a result of the decision, it is to be expected that access to the data of beneficial owners (including name, date of birth, place of residence) in the German transparency register will be restricted again in the future. Since January 1, 2020, the transparency register has been freely accessible to the public (Art. 23 (1) GwG (German Act on tracing profits from serious crimes)). Until then, inspection was only possible if a legitimate interest was demonstrated.