Bill on limiting accessibility of the Dutch UBO register

Recently [1] the Dutch Minister of Finance has submitted the Amendment Act Limiting Access to UBO Registers (Wijzigingswet beperking toegang tot UBO-registers) (Bill) for consultation. The Bill deals with a number of proposed amendments to the Dutch Trade Register Act (Handelsregisterwet) and the Implementation Act on Registration of Ultimate Interested Parties of Trusts and Similar Legal Arrangements (Implementation Act on UBO Register of Trusts). The Bill addresses two issues. Firstly, the Bill aims to make the Dutch UBO Register [2] (UBO Register) accessible to a limited group of persons and institutions. This limited access has become necessary as a result of the judgment of the Court of Justice of the European Union (CJEU) of 22 November 2022 (Judgment). [3] Secondly, the Bill aims to amend the UBO register for trusts and similar legal arrangements (UBO Register Trusts). We briefly discuss the Judgment, the intended changes to the existing UBO Register and the intended amendment to the UBO Register Trusts in this article.

Judgment of the ECJ

The Judgment is the direct cause of the Bill. Briefly, the ECJ ruled in its Judgment that the public accessibility of the UBO register is contrary to the fundamental right to respect for private family life and the fundamental right to protection of personal data. The public nature of the UBO register is thus impermissible. As an initial reaction to the Judgment, the Dutch Chamber of Commerce (Kamer van Koophandel) (KVK) had no choice but to temporarily close the UBO register for the general public (see an article we previously wrote on this topic here). Incidentally, the temporary closure of the UBO register did not remove the obligation to register UBOs.

The Bill seeks to implement the restrictions following the Judgment into national legislation and will thereby also provide a legal basis for the KVK to provide limited access to the UBO register.

What will the Bill change for the UBO register?

The Bill aims to further regulate access to the UBO register. The UBO register will be accessible to a limited number of persons and institutions once the Bill is ratified. The persons who will have access to the UBO register will be divided into five categories: (I) Financial Intelligence Units (FIUs) and competent authorities, (ii) sanction enforcement authorities, (III) Wwft-institutions, (IV) parties with a legitimate interest and (V) other persons as far as their own registered data is concerned.

I. FIUs and competent authorities

The first group of persons who maintain access to the UBO register are the competent authorities[4] and FIUs. Under Sections 15a, 21 and 28 of the Trade Register Act 2007, these authorities already have access to the UBO register. The Bill therefore does not change this. Incidentally, these authorities have now regained access to the UBO register.[5]

II. Authorities monitoring compliance with sanctions

The second group of persons given access to the UBO register are institutions charged with the supervision and enforcement of Sanctions Act 1997 (Sanctiewet 1997). The Bill cites non-life and health insurers, the DNB and the AFM as examples. In addition, certain administrative bodies may also be given access to the UBO register to the extent they have been authorised to do so by lower regulations (algemene maatregel van bestuur). These lower regulations are not part of this consultation.

III. Wwft institutions

The third group of persons who retain access to the UBO register are those institutions that are required to conduct customer due diligence under the Dutch Money Laundering and Terrorist Financing (Prevention) Act (Wet ter voorkoming van witwassen en financieren van terrorisme) (Wwft). For example this group includes,  trust offices, notaries, lawyers, banks and accountants. Since the Judgement, this group no longer has access to the UBO register. The Bill changes this: under the proposed Section 22a(1)(a) of the Trade Register Act 2007, they can request the name, month of birth, year of birth, country of residence and nationality of a UBO. In addition, they can also see the nature and extent of the (economic) interest held by a UBO.

IV. Parties with a legitimate interest

The fourth group of persons given access to the UBO register are those who have a legitimate interest. Which persons have a legitimate interest will have to be detailed by lower legislation. The KVK will have to determine whether someone has a legitimate interest. In the section below, we discuss in more detail what is to be understood by a legitimate interest and what this could potentially mean for the accessibility of the UBO register.

V. Viewing own data

Finally, anyone registered as a (pseudo)UBO in the UBO register can access their own data. According to the explanatory memorandum to the Bill, this could, in practice, partly result in individuals requesting their own extract so that they can then provide it to third parties who do not have this access themselves. This should therefore become the appropriate route for third parties to verify the UBO data of counterparties.

Legitimate interest?

It follows from the Judgment that the public nature of the UBO register is inconsistent with the fundamental right to respect for private and family life and the fundamental right to protection of private data. By contrast, parties who can demonstrate a legitimate interest should have access to the UBO register, so it follows from the Fifth Anti-Money Laundering Directive.[6] At present, it is still unclear what exactly is to be understood by a legitimate interest and how an application for access to the UBO register invoking a legitimate interest will have to be assessed by the KVK. Both the ECJ and the Fifth Anti-Money Laundering Directive do not define the term "legitimate interest".

The ECJ does mention that a legitimate interest must at least be related to the objective of the Fifth Anti-Money Laundering Directive. That is a broad framework, but thus includes at least the detection, investigation and prevention of money laundering.[7] The ECJ further makes clear in the Judgment that both the press and civil society organisations engaged in preventing and combating money laundering and terrorist financing could have a legitimate interest in accessing information on UBOs.[8] The same applies to persons who want to know the identity of a legal entity's UBO before they  enter into transactions with them.[9]

The Bill itself does not specify who should belong to the group of persons with legitimate interest. This will have to be fleshed out by lower legislation, taking into account the framework provided by the Judgment. The lower legislation will also have to specify the procedural aspects surrounding the invocation of a legitimate interest. The lower legislation will also impose rules on the use of personal data that are released following a successful appeal on this basis.

As the decision of the KVK qualifies as a decision of an administrative body, such a decision could be objected by an interested party including the UBO whose personal data is affected. This could potentially lead to delays in the application process which may not enhance the effectiveness of the UBO register. At the same time, it does provide safeguards to prevent unauthorised access to the UBO register.

The UBO register for trusts and similar legal arrangements

In addition to the UBO Register, the UBO Register Trusts also exist from 1 November 2022. The UBO Register Trusts is currently regulated by the Dutch UBO Register Trusts Implementation Act (Implementatiewet UBO-register Trusts). Until 1 April 2023, trustees (or similar administrators) residing or domiciled in the Netherlands[10] of a trust or similar legal arrangement had time to register the UBO of their trust or similar legal arrangement. Although Dutch law does not recognise the legal figure of a trust, the Dutch legislator made it clear that the registration obligation applies at least to (open and closed) funds of joint account (fondsen voor gemene rekening).[11] Like the UBO-register, the UBO-register Trusts was accessible to anyone until the Judgment, albeit certain data could only be viewed by competent authorities and the FIU (including the BSN number and tax identification number). The Bill aims to bring the UBO Register Trusts in line with the Judgment.

Under the Bill, the following groups will gain or retain access to the UBO Register Trusts: firstly, FIUs and competent authorities will retain their access. Secondly, Wwft institutions will have access. Thirdly, parties who can demonstrate a legitimate interest will be granted access (the remarks we made above on legitimate interest apply mutatis mutandis to the UBO Register for Trusts). Fourthly, other natural and legal persons may request the KVK to view the UBO Register Trusts insofar as they are legal arrangements involving a controlling interest in a legal entity established outside the EU. In doing so, they must be able to demonstrate that this legal arrangement has a controlling interest in a legal entity established outside of the EU. Finally, the trustee, on whom the obligation to declare the UBO rests, can request an extract to see the information recorded in the UBO register. This possibility is regulated in the proposed Section 7(1) part 4 Implementation Act UBO Register Trusts.

Closing

Interested parties can submit their views to the Bill until 28 June 2023. The response can be submitted at www.internetconsultatie.nl. As there is a great need for the limited access UBO register, the Bill is expected to be submitted to the House of Representatives not long after. The Dutch Minister of Finance earlier indicated that she expects to submit the Bill to the House of Representatives around the summer of 2023.[12]