1 December 2022

How EU judges risk giving the green light to corruption

By Henry Williams

If you’re wondering if a company might be corrupt, then it’s pretty useful to know who owns it. Any number of scandals, ranging from North Korean front companies financing nuclear proliferation, to money laundering, to straightforward organised crime have been uncovered thanks to public registers of ownership. But these vital resources could soon be lost, thanks to European judges deciding that they are incompatible with human rights.

Last Tuesday, the EU’s highest court ruled in favour of various Luxembourg company owners who claimed their publicly accessible details on the country’s company register left them at risk of, ‘fraud, kidnapping, blackmail, violence or intimidation’. In their judgement the court ruled that the EU’s provisions for the ‘prevention of the use of the financial system for the purposes of money laundering or terrorist financing’ were incompatible with Article 8 of the European Convention on Human Rights, the “right to respect for private and family life.”

From the UK, watching the ECJ’s ruling being enacted as the Netherlands, Austria, Cyprus and Luxembourg registers all go offline, it is hard not to weep (and feel relieved that we are no longer subject to the court’s jurisdiction). However, we are unlikely to escape its effects. The countries which have so far closed their public registers in response to the ruling have historically been some of the most popular havens for sanctioned Russian oligarchs and their corrupt wealth. The ruling also risks makes evading sanctions and hiding their loot that bit easier – and history suggests a chunk of that loot will end up in London, by hook or by crook.

The debilitating effects of these flows is also well documented. In London’s property market, a sector crying out for affordable housing, the vast Nine Elms development minimised its affordable housing provision, while one report found 40% of new owners are buyers from high-risk corruption countries. This number might now go up as countries with historic problems with organised crime, such as Italy or Romania, now have an added layer of complexity to shield their activities.

Outside of the EU, corruption in Albania is one reason cited for entrenched poverty in the north of the country. Younger graduates interviewed recently in Tirana claimed that ‘it is the desire for lives free from cronyism and corruption that are pushing people abroad’. So there’s a direct link between corruption and the exodus of 12,000 migrants across the Channel so far this year, many of whom will inevitably end up in the cannabis and cocaine trade so dominated by their fellow countrymen in the UK. The ECJ’s ruling means there is now no onus on the country’s political and business elites to clean up their act and open up their books in their bid for EU accession.  

However, the ECJ’s ruling also provides an opportunity for the UK. The Government is due to publish its Anti-Corruption Strategy later this month, and one area likely to be discussed is the importance of the public in helping tackle the problem of economic crime. This makes sense, as it is the reporting from NGO’s like Transparency International and the continual focus on the issue in the media, not just the official bodies which do so much to police economic crime. Government figures do not necessarily seem to have the same high standards.

The ECJ’s ruling was predicated on a concern that general access to company registries meant that the number of people who could access individuals’ personal details was potentially limitless. Experience suggests otherwise. The Brexit Freedoms Bill, introduced by Jacob Rees-Mogg, is designed to, ‘ensure the UK’s high standards in areas such as workers’ rights and the environment are kept’ while, ‘also giving the UK the opportunity to be bolder and go further than the EU in these areas’. It can do the same for anti-corruption, and in doing so hopefully remind our neighbours why open access to information is so vital in stopping the graft which makes everyone poorer.  

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Henry Williams is Head of Investigations at Themis.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.