Author: Ondřej Florián, Alexandra Parnaiová

The entry into force of the new Act on Registration of Beneficial Owners[1], which transposed the amendment to the AML Directive[2] into Czech law in June 2021, has entailed a number of novelties – the largest of which were the introduction of sanctions for incorrect or incomplete registration (private law – invalidation of certain shareholders rights, and public law – a fine of up to CZK 500,000) and the disclosure of certain information to the general public.

The Register of Beneficial Owners is currently available in the Ministry of Justice’s web application, and anyone can find out the following information about any company’s beneficial owners – all first names and surnames, month and year of birth, country of citizenship, country of residence, and a brief description of what the beneficial owner status is based on.

The Court of Justice of the European Union (“CJEU”) in its decision in Joined Cases C 37/20 and C 601/20 of 22 November 2022, has ruled that the provision of the AML Directive obliging Member States to make certain information on the beneficial owners of legal entities and legal arrangements available to the general public is invalid.

The decision has caused a stir in practically all the circles concerned, both among its supporters (“the publication of this information does not help in any way to fulfil the purpose of the legal regulation – to reveal ownership structures and prevent access of sanctioned persons to financial markets”), opponents (“the civil society represents another level of control of the correctness of the registration and therefore of the monitoring of the purpose of the regulation”) and especially among the registered beneficial owners, whose personal data are currently partially publicly accessible to all, via the Internet.

First of all, it should be noted that the CJEU’s decision has only affected the AML Directive, and not related national regulations. Moreover, the Court did not  prohibit the disclosure of information to the public, but only (albeit on the basis of strong reasoning, see below) annulled the provision of the AML Directive that obliges Member States to make such information available to the public. The Directive is therefore currently silent on accessibility of information to the public.

Since the Directive is generally an EU law that sets only common objectives to be jointly achieved by Member States, while setting only the boundaries within which they may move, the Czech Act on Registration of Beneficial Owners should therefore not be in conflict with the AML Directive itself.

The approach of individual Member States in response to that decision varies. Some countries, such as Luxembourg, have made the information in their registers completely inaccessible (including to public authorities), while others, such as Belgium, Austria and Ireland, have made the registers immediately unavailable to the public. For the time being, the Czech Republic has not proceeded to any modification, while the validity of the Act on Registration of Beneficial Owners remains unaffected (in the wording of its latest amendment which entered into force on 1 October 2022).

In its decision, the CJEU argues that the disclosure of information on beneficial owners to the general public is contrary to Articles 7 and 8 of the Charter of Fundamental Rights of the European Union (Respect for private and family life and Protection of personal data) and that the disclosure of information does not further the purpose of the Directive in any way. So, we are currently in a paradoxical situation where the Czech Act is in compliance with the AML Directive, the AML Directive is in compliance with EU primary law (EU Charter of Fundamental Rights), but the Czech Act is very likely in conflict with EU primary law.

The Czech Act therefore remains in force in its original wording and information about beneficial owners is still (in accordance with the Act and the Directive) accessible to the general public, but the Court’s decision provides very strong argumentative weapons for beneficial owners who would try to make their data in the Register inaccessible. However, the road to making it inaccessible at the same time would inevitably be paved with legal proceedings, which would very likely reach up the Constitutional Court. The second option is that the Czech legislator will respond to that decision by amending the Czech Act, for example, by making the information unavailable to the general public, but returning to the Act the possibility to request specific information, e.g., for investigative journalists or various associations dealing with money laundering issues.

If you have any questions regarding the issue of identification and registration of beneficial owners, please contact our specialised team, which is ready to assist you with the complete registration as well as with the revision of the correctness of the registration after the latest amendment to the Act on Registration of Beneficial Owners.

[1] Act No. 37/2021 Sb., on Registration of Beneficial Owners, as amended

[2] Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending Regulation (EU) No 648/2012 of the European Parliament and of the Council, and repealing Directive 2005/60/EC of the European Parliament and of the Council and Commission Directive 2006/70/EC, as amended by Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018 amending Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing and Directives 2009/138/EC and 2013/36/EU