Is privacy dead?

It is often said there is one law for the rich and another for the poor – well in the arena of privacy – that is certainly the case – EU law protects the poor but not the rich.

Caroline’s Club member Filippo Noseda private client partner with law firm Mishcon de Reya wrote an article which was published in Tax Notes International on February 14, 2022 and sets out the key findings of the EU Advocate General Giovanni Pitzruzzella opinion in the consolidated case of Sovim and WM against breaches of the General Data Protection Regulation (GDPR) and fundamental privacy rights committed by Luxembourg’s public registers of beneficial ownership.

In simple English, GDPR protects the privacy of private information but under Article 30 of the 5th Anti Money Laundering Directive which became law on 10th January 2020 the EU wants to be tough against money laundering and terrorist financing which will affect the privacy of business owners.

The opinion in this case downplays privacy and interference because the end justifies the means – but Filippo and I are not at all sure The beneficial owners register in Luxembourg publishes the name of all people who own a 25% stake in a Luxembourg company whether owned by a trust or outright.

The 5th Anti Money Laundering Directive is to be implemented by every one of the 27 countries in the EU although Italy is dragging its feet. The UK was one of the first to introduce a beneficial ownership register in 2016 which is operated by Companies House. It is called the Persons of Significant Control Register and lists 5.1 million names. 

But what is really shocking is that although the Advocate General accepts that access to personal data on the beneficial owners central register ‘is likely to result in maximum dissemination of such data’ and possibly a ‘large scale dissemination of such data’ but is of the opinion that this information is not particularly sensitive and would not ‘substantially affect the privacy’ of the lives of the people named.

For any ‘private client practitioner’ with experience of dealing with wealthy families this information is dynamite for families at war and a God send for criminals, crooks, and thieves.

To give an example, I have a client who has six children from three different relationships. The older children were born when their father was building the family business and are hardworking, the younger children were born when their father had made a serious fortune and are lazy. The younger generation is keen to find out who will inherit and whether the business is to be sold so they need never have to work. They are keen to litigate to get the company sold and their hands on some serious cash.

Another client of mine treats privacy as a key consideration because he knows only too well the threat of kidnap, attention from gold diggers, opportunistic litigators, or the threat of blackmail. For the Advocate General to say that the interference is only moderate is to fail to understand the reasons why this minority was traditionally called the ‘private client’.

The other aspect which was considered is whether a beneficial ownership register open to the public is going to make a difference to curtailing financing terrorism and money laundering

The Advocate General believed the removal of the restriction to grant access to the register only to those who have a ‘legitimate interest’ was necessary to speed up the process and make a more coherent approach across all the EU states.

This case is on its way to be heard by the Court of Justice of the EU, where the opinion of the Advocate General could be overturned – but my concern remains that the privacy of wealthy people should not be sacrificed because it is ok to envy the rich and for them to suffer. Wealthy families are a minority and should have the same protection as any other EU citizen.

It seems that wealthy families are one of the few minorities left who remain ‘fair game’ in the press on the misplaced view that all rich people have made their money through corruption and employee exploitation.

A good example to show how wrong this view is, is J.K. Rowling who is now wealthier than the Queen. She made her fortune by writing about a boy wizard – no corruption and no exploitation.

Most wealthy people I know like J.K. Rowling made their fortune by hard work and good ideas to give people what they want to buy – whether it is a good read, an exceptional holiday, or a new food. The lives of wealthy families should not be made a misery by some ill-thought-out legislation.

I have invited Filippo to speak to our next club members meeting in April before we split into our networking pods. Privacy implies that there is something to hide, which is why there are few voices defending it – and if we as the ‘private client profession’ maybe we will also be criticised  as wanting to help our clients evade tax and escape transparency.

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