Minister Hoekstra of Finance, also on behalf of Minister Grapperhaus of Justice and Security and Minister Wiebes of Economic Affairs and Climate, sends the further memorandum of reply on the UBO register bill.
Amendment of the Trade Register Act 2007, the Prevention of Money Laundering and Financing of Terrorism Act and some other laws in connection with the registration of ultimate stakeholders of companies and other legal entities to implement the amended Fourth Anti-Money Laundering Directive (Implementation Act on Registration of Ultimate Stakeholders of Companies and Other Legal Entities)
Together with the Minister of Justice and Security and the State Secretary of Economic Affairs and Climate, I thank the Standing Committee on Finance for its further questions. These questions are answered in the order of the further report issued by the committee. In response to the information provided by the Raad van State , a number of groups have asked questions that are partly the same. In those cases, in the order of the committee report, the questions have been answered on the first occasion, and subsequent questions refer to those answers.
This further memorandum of reply is also given on behalf of the Minister of Justice and Security and the Secretary of State for Economic Affairs and Climate.
The members of the CDA Group would like to receive a detailed response from the government to the letter from the Vice-President of the Raad van State in response to the Senate's request for further information on the position of church denominations. In particular, they ask the government to address the scope of Article 30(9) of the Directive with respect to denominations and their administrators.(1) Under this Article 30(9), a blocking option of personal data may be provided for exceptional situations, if access to such data exposes the beneficial owner to a disproportionate risk. According to the Council, the disclosure of a person's religious or philosophical beliefs may be inferred from membership on the board of a denomination, with the result that this circumstance may play a role in assessing whether there is reason to use the masking option in an individual case. After all, "these directors may run disproportionate risks or otherwise be exposed to undesirable behavior, such as intimidation or harassment or blackmail," according to the Council.'(2) The compelling public interest in money laundering and terrorist financing must then give way in the concrete case to the fundamental interest of the beneficial owner that his personal data are not accessible to the public. The interpretation of Article 30(9) chosen by the government so far results in the possibility of using the blocking option only in the case of entry on a police protection list (central list, decentralized lists). This would mean that only the foreclosure requests of directors of denominations already on such a list would be honored by the Chamber of Commerce (CoC). Other grounds for foreclosure are minority and legal incapacity. In the opinion of the members of the CDA Group, this foreclosure possibility of Article 30, paragraph 9 should also be declared applicable if directors of denominations are not on such police protection lists. Is the government prepared to do so?
The government can follow the information provided by the Raad van State regarding the relationship of the AVG to Directive (EU) 2018/843 and the registration of UBOs of church denominations in a public UBO register and believes that there is a clear exposition. The Raad van State concludes that Article 30 of the Directive provides a number of safeguards and specific exceptions to protect the privacy and security of UBOs. Given the consideration already made by the European legislator and the rules contained in the Directive for the protection of privacy and security, there is therefore no room for the national legislator to make a further independent assessment on the relationship with the AVG in this regard. In addition, the Raad van State notes the possibility in the Directive to shield data of a UBO in exceptional situations and on a case-by-case basis, including if the UBO is exposed to a disproportionate risk. Finally, the Raad van State of State concludes that the differences in registration of natural persons of denominations between the UBO register on the one hand and the trade register and the anbi regulation on the other hand can be explained by the fact that the UBO register stems from Union law binding regulations.
The ninth paragraph of Article 30 of the Directive allows Member States to provide for masking of the public data of a UBO. The Directive allows this only in exceptional circumstances to be determined by national law if access to the data exposes the beneficial owner to disproportionate risk, a risk of fraud, kidnapping, blackmail, extortion, harassment, violence or intimidation or if the UBO is a minor or otherwise incapacitated. A request for the blocking of a UBO's public data must be considered on a case-by-case basis, with a detailed assessment of the exceptional nature of the circumstances. In addition, the ninth paragraph provides that Member States that make use of this possibility must publish annual statistics on the number of exceptions granted and the reasons, and report to the Commission.
As the government has indicated, it considers it important that in certain exceptional circumstances, shielding of public data is possible. This is emphatically an exception to the general rule of public data. The Directive requires that the exceptional circumstances be defined in national law. For the national legal interpretation of the blocking regime, we therefore looked at how this is set up in other public registers in the Netherlands. This was also prompted by the fact that the Chamber of Commerce does not have the necessary expertise to make a detailed assessment of the existence of a disproportionate risk of fraud or kidnapping, for example. From this, the Land Registry emerged as a public register that also contains personal data, and has a similar shielding regime. The Land Registry offers natural persons the possibility of shielding if they are secured by the police due to risks to their security. The assessment of whether a person is eligible for protection is made by the Openbaar Ministerie or the NCTV. Such a shielding regime is in line with the requirements of the Directive both in terms of conditions and substantive assessment.
The Chamber of Commerce will check whether a person is on the central or decentralized list of protected persons when a request for shielding is made. UBOs who anticipate that the public disclosure of the registry poses a disproportionate risk may report in advance to the police or the Openbaar Ministerie s Office, who will assess on a case-by-case basis whether there is such a threat, or conceivable threat, that government security is necessary. The implementation of security may vary from case to case. Agencies will assess all relevant facts when requesting security. In the assessment, special attention is paid to the ability to exercise fundamental rights, including freedom of religion or philosophical belief.
Therefore, the fact that the UBO registry would make the data of natural persons public may prompt the expansion of the list of secured persons. Of note here is that from the start of the registry, existing legal entities have 18 months to register their UBOs and can use that time to request security.
The government indicates that the European directive on which the mandatory beneficial owner or interested party (UBO) registration is based does not exclude legal entities from this obligation, so that all associations and foundations, religious or otherwise, must register their UBOs. However, this has not been an obstacle for several member states, including the Netherlands, to do exempt certain legal entities from mandatory UBO registration. For example, the PwC study on the implementation of UBO registration shows that 10 of the surveyed 17 EU/EEA countries have included such an exception for governmental institutions, international organizations of a public nature and owners' associations, among others.(3) The Netherlands also has an exception from UBO registration for public law legal entities, associations without full legal capacity that do not run a business, owners' associations and other private law legal entities (some types of historical legal entities, such as hofjes, boermarken, fundaties and guilds). Religious entities are exempted from UBO registration in Finland and Malta. How does the government think these exemptions relate to the Directive?
The directive requires member states to ensure that companies and other legal entities incorporated within their territory maintain and register their UBOs in a public register. Legal entities are not harmonized within the EU. The Directive states in the recitals that the concept of legal entity should be interpreted as broadly as possible. In the Netherlands, it has been considered to whom the obligation to register in a public register should apply. It was assessed that in light of the purpose of the Directive, registration of a number of parties does not make sense. This applies to legal persons under public law because they are part of the State and by definition there can only be a pseudo-UBO. For associations without full legal capacity, or informal associations, it is true that they cannot participate fully in trade. They cannot acquire all the rights and obligations as natural persons, as is the case for other legal entities. In addition, the directors of such an association are jointly and severally liable, the incorporation of the association without full legal capacity does not require a notarial deed or registration in the commercial register. The association of owners is exempted because the money laundering risks are very limited given the mandatory legal regime in Book 2 of the Civil Code. Thus, persons are members of the association by operation of law if they hold an apartment right. The exclusive purpose of the association is to manage the community for which the members provide funds. With regard to historical legal persons, the government has provided for an exception because this concerns a very limited number, with very limited activities, and, moreover, no new ones can be created from these legal persons. Companies subject to disclosure requirements under Union law, or to equivalent international standards ensuring adequate transparency of ownership information, are further already excluded under the Directive from registration of UBOs in a public UBO register.
In what ways have the possibilities of masking off personal data (for everyone, for certain categories, limited access to certain data) been implemented so far in the member states that have already implemented this directive?
The ninth paragraph of Article 30 of the Directive allows Member States to provide for masking of (part of) the public data of a UBO. This is therefore an option which Member States can choose whether or not to make use of. The Directive sets a number of requirements in this respect, but does not further prescribe what this option should look like nationally, other than that if it is used, the blocking of the public data may not apply to financial institutions, credit institutions, notaries, competent authorities and the FIU. Therefore, in all Member States, at least, the masking does not apply to these parties. There is currently no overview available of Member States' use of this option and its concrete, national implementation. However, the Directive requires Member States, if they use this Member State option, to publish annually data on the number of foreclosures granted and the reasons for foreclosure. In that context, the longer the registries are operational, the more information will become available on the practical operation of the blocking regime in those Member States.
It remains strange that in one and the same Dutch law, on the one hand, the names of directors of a church denomination may not be registered and, on the other hand, must be registered as pseudo-UBOs. The government announces in the memorandum of reply that the Van der Linde amendment will require a "technical amendment to the law" to be included in a first appropriate bill. What legislative amendment does the government have in mind?
With the adopted Van der Linde amendment, among the exceptions to the registration obligation, "church denominations" has been dropped. Section 15a refers to Sections 5 and 6(1) of the Trade Register Act 2007 for the obligation to register beneficial owners. For church denominations, however, this reference is incomplete. Church denominations have two grounds for registration in the Trade Register, namely Section 5 (in the event that they conduct a business) and Section 6(3). The amendment did not intend to distinguish between these grounds for registration. However, the third paragraph of Article 6 is missing in its reference to legal entities subject to registration. Therefore, this paragraph still needs to be supplemented. This is the subject of the legislative amendment still required. It should also be noted here that Article 6(3) does not itself contain the bodies of denominations subject to registration, but this paragraph provides a basis for establishing the obligation to register by order in council. Thus, the obligation to register in the commercial register does not follow directly from the third paragraph.
Read the rest of the memorandum of reply on the UBO register bill
(1) Directive (EU) 2018/843.
(2) Parliamentary Papers I 2019/20, 35179, G, p. 3
(3) PWC, The UBO register: overview of the implementation status of the UBO register in 17 EU/EEA countries update 2019, December 2019.
