In my 26 November 2015 blog, I wrote about the impact on
trusts of the EU’s first draft of the Fourth Anti-Money Laundering Directive (4AMLD).
It seemed that only if the trust generated ‘tax consequences’ would the
trustees have to provide details about the trust to a central register, which
would not be publicly available.
However, a revised version of the draft 4AMLD was published by the
European Commission on 5 July and it envisages public access to trust
beneficial ownership information for certain trusts only. The coming into force of the 4AMLD is brought
forward to 1 January 2017, from 26 June 2017.The revisions distinguish between trusts which consist of
(1) assets held by, or on behalf of, persons carrying on a business which
consists of or includes the management of trusts, and acting as trustee of a
trust in the course of that business with a view to gain profit and (2) trusts
which do not fall within this definition.
For the former kind of trust, the European Commission believe that ‘...It
is legitimate and proportionate to grant public access to a limited set of
information on the beneficial owners...’ on the basis that ‘third parties
wishing to do business with the entity or structure require access to reliable
information about the ownership, including the identity of the controlling
owners...’. For the latter, the name,
month and year of birth, the nationality and the country of residence of the
beneficial owners of the trust will only be made available to persons or
organisations who can demonstrate a legitimate interest in the
information. In all cases, the register
will be accessible by tax and other public authorities responsible for combating
money laundering.
The revisions provide that access to beneficial ownership
information should be restricted in whole or part in exceptional circumstances,
where the beneficial owner would be at risk of fraud, kidnapping, blackmail,
violence or intimidation, or where the beneficial owner is a minor or otherwise
incapable. The criteria for these
exemptions to apply will be decided by each EU Member State.
The Member State in which the trust is administered (not in
the Member State which provides the governing law of the trust, as in the
previous draft) will have primary responsibility for ensuring the inclusion of
details about the beneficial ownership of trusts on a central register held by
it. It must also ensure that, if the
trust is governed by the laws of another Member State, beneficial ownership
information for the trust is shared with it.
Any trust administered in any Member State (not just those generating
tax consequences) should have beneficial ownership information held on a central
register. A trust is considered to be
administered where the trustees are ‘established’ – this is not defined
further. The register is to include
details about the identity of the settlor, trustee, protector (if any), the
beneficiaries or class of beneficiaries and any natural person exercising
effective control over the trust.
The central register will need to be kept up to date and
therefore the revised 4AMLD will introduce a system of ongoing monitoring of
beneficial ownership and the need for trustees to keep updated beneficial
ownership information and report from time to time, as opposed to the current
system of ownership verification at the outset of a business relationship being
formed.
It will be very interesting to see if the difference in treatment
between trusts run by ‘for profit’ professional trustees, as opposed to family
member trustees, proposed by the revised 4AMLD results in some calls for
trustee retirements.
Wealth Lawyer UK is
going on its summer vacation! Next post
Thursday 8 September.
