In my 13 March 2014 blog on ‘Trusts and the EU’s Fourth Anti-Money Laundering Directive’, I highlighted the EU Parliament’s plans to introduce a register of settlors, trustees and beneficiaries of trusts, as set out in the draft of the Fourth Anti-Money Laundering Directive. The Directive has now been finalised and, whilst it looks as though the register will still go ahead, the number of trusts affected will be reduced and trust information will not be placed on a publicly available register.
Article 30 of the Directive provides that EU Member States must oblige trustees of any trust governed by the laws of an EU Member State to hold accurate and current information on the beneficial ownership of the trust. This includes the identity of the settlor, trustees, a protector if one is appointed, the beneficiaries or class of beneficiaries and any natural person exercising effective control over the trust. Trusts implied by law, such as constructive trusts, are not included.
The above information will need to be given to any entity obliged to carry out money laundering checks with whom the trustees establish a business relationship. Only when the trust ‘generates tax consequences’ (not defined but presumably meaning, for the UK, only if a trust tax return has to be filed) must the above information appear in a central register. However, under the latest version of the Directive, only competent authorities and Financial Intelligence Units in the Member State and, if requested, other Member States, can access the information, along with entities needing to carry out money laundering identification checks.
The requirements apply to other types of legal arrangement ‘with a structure or functions similar to trusts’ which suggests that foundations will have the same reporting obligations too. Will other vehicles for holding family wealth be similarly affected? The Directive requires details of beneficial ownership of corporate entities (but not the holder’s address or full date of birth) to be held on a central register and made available to any persons or organisations who can demonstrate a legitimate interest. Independently, the UK’s Small Business, Enterprise and Employment Bill is currently making its way through Parliament and is expected to introduce the need for companies to maintain a publicly accessible register, available for inspection at the registered office (or centrally on the register at Companies House), stating who has significant influence or control of the company. What that means is still being thought through, but as currently drafted in the Bill it means direct or indirect ownership of 25% of a company’s shares or voting rights, or the right to appoint or remove a majority of a company’s directors, among other things. For families wishing to maintain privacy over their wealth structuring arrangements, are trusts to be preferred now?