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.