Beneficial ownership! Public registry and privacy rights

Jamaica comes under close watch as its February 2023 date looms to address its strategic deficiencies in its regime to combat money laundering. The country is among 26 jurisdictions named in the Financial Action Task Force (FATF) October 2022 publication of high-risk and other monitored jurisdictions for money laundering.

The FATF’s assessment of Jamaica records three areas that require improvements. Among them is Recommendation 24 of the FATF’s 40 recommendations aimed at combating money laundering. Recommendation 24 addresses beneficial ownership information for legal persons and requires the implementation of a public registry of accurate and up-to-date basic beneficial ownership information, available on a timely basis to competent authorities. Failure to adequately satisfy the FATF of our efforts to address these areas could have negative outcomes for Jamaica.

In this missive, we explore beneficial ownership information and its availability to the public, considering the recent ruling by the European Court of Justice (ECJ) on November 22, 2022, which ruled on the infringement of guaranteed rights by this FAFT requirement.

FATF REQUIREMENT

Recommendation 24 of the FATF recommendation on combating money laundering speaks to the Transparency and Beneficial Ownership of Legal Persons. In its interpretive notes on this recommendation, the FATF indicates that “competent authorities should be able to obtain, or have access in a timely fashion to adequate, accurate and current information on the beneficial ownership and control of companies and other legal persons that are created in the country”. It goes on to prescribe four minimum requirements by which this is to be accomplished. Among them is the requirement to make the information publicly available.

BENEFICIAL OWNERSHIP

Beneficial ownership, simply put, seeks to identify the legal person(s) who controls or has controlling interest in an established enterprise or otherwise who owns the enterprise and calls the shots. As a mechanism to fight money laundering, it is important that such information is known and is available to law enforcement. Importantly, financial institutions often carry the burden of unearthing the beneficial ownership of businesses as part of their due-diligence requirements. This becomes quite challenging when the beneficial ownership is shrouded in secrecy through offshore registration using Special Purpose Vehicles (SPVs) and Trust arrangements and often through several obscure legal entities.

Public Registry and Rights – Jamaica

Charter of Fundamental Rights and Freedoms

The Charter of Fundamental Rights and Freedoms (Constitutional Amendment) Act, 2011, in Chapter III Section 13(3), outlines the rights guaranteed to Jamaicans under the Constitution. Privacy rights, as contained in this section, appear at Section 13(3)(j)(ii) and (iii). Specifically, they indicate “the right of everyone to:

(ii) have respect for and protection of private and family life, and privacy of the home; and

(iii) protection of privacy of other property and of communication.”

DATA PROTECTION ACT

The Data Protection Act, 2020, under Part II, addresses the rights of data subjects and others. Under Section 6(2)(a) of the act, “an individual is entitled to be informed by the data controller, free of charge, whether personal data of which that individual is the data subject are being processed by or on behalf of that data controller”. Further, in 6(2)(b), once personal data are being processed, the data subject is entitled to “a description of the personal data of which the individual is the data subject, the purpose for which the personal data are being or are to be processed and the recipients or classes of recipients to whom they are, or may be, disclosed”.

Takeaways from the ECJ’s ruling in view of privacy rights and the processing of personal data, making the Jamaican connection

In Paragraph 35 of its ruling, the ECJ acknowledged that “Article 7 of the charter guarantees everyone the right to respect for his or her private and family life, home and communications, while Article 8(1) of the Charter expressly confers on everyone the right to protection of personal data concerning him or he”. We note the similarity of the wording of Article 8 and that of Section 13(3)(j) under the Jamaican Charter of Fundamental Rights and Freedoms. The ECJ, in its ruling, made several notable judgements as it concerns privacy rights and beneficial ownership in public registries. In Paragraph 38 it ruled that access to any member of the public to personal data affects the fundamental rights guaranteed under Article 7. At Paragraph 39, it ruled that making personal data available to third parties interferes with fundamental rights. It went on in Paragraph 44 to rule that the requirement for general public access to information on beneficial ownership constitutes a serious interference with fundamental rights enshrined in Articles 7 and 8 of the Charter.

CONCLUSIONS

As Jamaica rushes to address its strategic deficiencies, and specifically Recommendation 24 on Beneficial Ownership, prudence dictates that we take note of this ruling from the ECJ given the close similarity of wording in Article 7 and 8 when compared with Section 13(3)(j) in our Charter of Rights. While not authoritative given Jamaica’s common law jurisprudence, it would be foolhardy to embark on a trajectory that could later be challenged constitutionally as we seek to comply with Recommendation 24.

The FATF, in October 2022, issued for public consultation, amendments to Recommendation 24. The amendments are aimed at “strengthening the international standards on beneficial ownership to better prevent and deter the misuse of legal persons” and to respond to outcomes of the FATF’s mutual evaluation process. Countries will now be expected to adopt a multipronged approach in collecting beneficial ownership information. The revision will also now require countries to adopt a risk-based approach in assessing their exposure to legal persons within the jurisdiction, and externally, where there are “sufficient links with their country”.

Of note in perusing the revised guidance, the FATF may be amenable to publicly available beneficial ownership registries not being an absolute requirement going forward. At Paragraph 10.1, which addresses “Example features – Public authority or body holding beneficial ownership information”, it records at “(xii) Basic information on the company is publicly available; some or all BO [beneficial ownership] information could also be made publicly available or be made available to financial institutions and designated non-financial businesses and professionals at a minimum”.

- Fabian E. Sanchez, JP, CIPM, Intl. Dip. AML, CAMS, CIRM, MBA, BBA, is a certified anti-money laundering specialist. Email feedback to AMLFundamentals@outlook.com and columns@gleanerjm.com