It was disappointing to hear of the outcome of last week’s vote in Brussels to introduce new requirements for family trusts to be disclosed on public registers. STEP supported the original draft legislation to enhance anti-money laundering procedures proposed by the EU Commission, but the proposal voted through by the Economic Affairs and the Justice and Home Affairs Committees will also require all trusts, however low risk from an anti-money laundering point of view, to be entered on a public register showing details of all the beneficiaries.
The decision by the Economic Affairs and the Justice and Home Affairs Committees has implications for UK trusts and seems to be based on a complete misconception of how they are used by most people. It will potentially impose bureaucratic burdens on millions of families in the UK and require them to publicly register details of plans they may have put in place to provide for family members.
Far from visions of trusts being used to hide illicit funds, HMRC research confirms that around 25 per cent are used to secure the future of peoples’ families. Unlike Europe, most homes in the UK are owned jointly and are legally held in trust; the same is true of many life insurance policies. Perhaps most importantly, trusts are widely used to provide for vulnerable family members.
While STEP supports efforts to make anti-money laundering rules more effective, most UK trusts are very low risk in money laundering terms. The establishment of public registers will result in little gain for significant cost and loss of privacy for UK families.
I’m sure many eyes will now be on the next vote on the new requirements by the whole European Parliament which is expected on 11 March.