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The EU stands up for financial privacy (yes, really)

For once (yes, it happens) the legal authorities of the EU are in the right, in my view, and their critics are wrong, contrary to what Henry Williams, author of this article in CapX, says.

A top EU court has ruled that creating public registers of beneficial ownership, so that everyone can just find out who owns what, is a dangerous loss of privacy. In my view, if people are concerned that X or Y is an owner of a company or trust and that is somehow nefarious, they should get clearance first from a court or suitable legal authority and show some reason for the desire to obtain that data. It is not, in my view, acceptable to put everyone’s beneficial ownership details in the public domain so that journalists and others, many of whom seem to have it in for anyone whom they deem rich, can put this information into the public domain. For instance, public registers means that people can simply go on “fishing expeditions” and dump all kinds of financial data into the public domain, and damn the consequences. Sure, if politicians and the like have questionable financial affairs, some on the libertarian side will think they are fair game, but those whose only “crime” is to be rich or successful will get caught in the crossfire.

There are also risks, as lawyers have pointed out, that such owners can be targeted by gangs. This is not paranoia. And paradoxically, the pressure for beneficial ownership disclosure clashes with data protection rules in the EU – known as GDPR.

It is arguable that Swiss bank secrecy was a step too far, but there is such a thing as legitimate privacy. Would, for example, the author of the linked article from CapX be happy for there to be public databases, accessible to all, of medical information, etc? (Maybe he is.) We seem to live in an era where due process of law and respect for privacy are forgotten or seen as old-fashioned issues.

Being independent of the EU does not mean that everything in the EU is bad or worse than in the UK. Occasionally, the EU gets things right. The key is that decisions rest in the hands of the UK electorate.

Financial privacy is not a popular subject, and there are lots of campaigners, sometimes coming from a good place, who think putting everything in the public domain is a good thing. They are wrong, and for once, a court has done the right thing. I doubt, of course, that this debate is over.

6 comments to The EU stands up for financial privacy (yes, really)

  • Steven R

    I don’t quite understand the issue. Here in the States, I can find out who owns a particular piece of real property, and the appraised taxes on said real property, by simply asking at the County Courthouse. That’s all public record. I can’t do the same thing for vehicles like cars, planes, or boats, nor can I have access to their income taxes (although most states list how much a public employee makes from the government in pay, but only that pay). I’m not quite sure how it works with stocks in incorporated companies, but I suspect that since they are public companies learning who owns stocks in the them isn’t protected.

    Plus, a lot of the rich don’t technically own stuff like their own houses and cars and whatnot. They’re held in trusts or various holding companies and “leased” to the rich guy.

  • Johnathan Pearce (London)

    Stephen R, the issue is that a lot of people who are beneficial owners of trusts/companies etc have these entities registered in places such as Delaware and South Dakota in the US, for example, or the Cayman Islands, Luxembourg, Monaco, etc. What some campaigners demand is that anyone, without needing to show just cause, should be entitled to know who all these folk are.

    People who set up trusts and so on are not always, contrary to what some always think, are up to no good. Some want to keep their names away from the gaze of kidnappers and other hostile actors. Of course it is also true that various dodgy folk have used these jurisdictions and entities. However, if it is feared that this is the case, then those who suspect this should make a request and file a legal request, and go through some form of due process.

  • Steven R

    That makes a little more sense.

  • bobby b

    I’ve had to pierce a few corporate veils in my day. There are ways to accomplish this, but it must be an aimed effort – who owns “John’s Trucking” and is thus responsible for this unfunded/uninsured liability? That sort of thing.

    If the EU ruling preserves the ability to do this, then, yay! A blow for privacy. If it interferes with this, then I’d start with the cui bono questions.

    (Say a truck owned by John’s Trucking negligently causes a million dollars of damage, but is insured for only $20k. That $20k might be the only recovery possible. But also say that Apple actually owns “John’s Trucking” in a “hidden” trust. If you know that, there are ways to collect from Apple.

    If the state knows about that ownership through legal corporate structure filings but refuses to share that knowledge, there’s a problem. At that point, people start to push back against corporate entity liability shielding, for good reason. If we want to retain corporate shielding of personal liability – which is why we have corporate structures mostly – we cannot overextend that protection.)

  • There’s also the old problem of people recommending companies, stocks, products, etc. when they have a vested interest in said companies, stocks, products.

    Sure, we have rules on disclosure, but if that were more open and accessible then there might be a bit more honesty.

    Like all of these “Internet Influencers”. I’m pretty sure that when they push “Brand X” or diss “Brand Y” then there are financial incentives for them doing so (not always, but mostly) and more open disclosure could prevent this sort of thing.

    Then again, I’m a cynic who thinks that most sales people flogging shit are on the make. I’m seldom wrong.

  • Paul Marks

    As I have tried to explain in another place – this goes back to land law.

    In lands where there is German law, or other similar legal systems, there is a central book – where everyone can look up who owns what, without the need for expensive court cases and what-not. In English speaking lands this is sometimes called “Torrens Title” – named after the man who introduced such a system into South Australia (from where it spread to other English speaking places).

    This seems to have been an effort to expand such as system from land, to everything else – so that the ownership of anything at all would be a matter of public record.

    I tend to agree with the court that this is going too far.