Can transparency go too far?

For some years now the Channel Islands and the Isle of Man have been co-operating with the UK in its mission to improve international financial transparency. All of these jurisdictions have signed up to international information exchange agreements requiring automatic annual exchange of financial details between tax authorities.

They have also created registers of persons who directly or indirectly own or control entities such as companies and Limited Liability Partnerships. As part of the ongoing process of openness, the three Crown Dependencies were all planning to provide public access to these registers, but those plans are now on hold.

The fly in the ointment is a CJEU ruling that similar public access to Luxembourg’s Register of Beneficial Ownership represented a “serious interference with the fundamental rights to respect for private life and to the protection of personal data". This has already resulted in Luxembourg and the Netherlands removing public access from registers, and it is now making Jersey, Guernsey and the Isle of Man think again as well.

In a joint statement, the three jurisdictions said that the implementation of beneficial ownership access legislation will be delayed for a short period to enable consideration of its impact and obtain specialist legal advice, expected to be received in early 2023.

The UK operates two public registers of beneficial ownership – one for persons of significant control of UK companies, and one for overseas entities owning UK real estate. Anybody can access these via Companies House and, so far, the UK government has not made any comment on the CJEU ruling.

Of course, neither the UK nor Crown Dependencies are bound by the CJEU, and it would be perfectly possible for them to continue with their current approach. It is certainly in all our interests for governments and tax authorities to share data in order to fight money-laundering and tax evasion, and the CJEU ruling will not change this.

But, the CJEU ruling raises an important point about how we balance different rights, and this is an opportunity to stand back and consider where legislation should go next. There are very good arguments for, as well as against privacy, and perhaps having comprehensive registers of ownership that are easily accessible to government but not to the general public is a fair compromise.

There is no doubt that the steps taken so far to make it harder to hide wealth from the authorities are both welcome and effective, and there is more that should be done. However, the CJEU ruling is a reminder that the right to privacy should not be ignored. There is a big difference between not wanting HMRC to know how wealthy an individual is and not wanting their neighbour to know.