The UK Treasury has published a consultation paper on the transposition of the EU’s Fifth Anti-Money Laundering Directive (5AMLD), which expands upon the scope of registration for trusts and widens the accessibility provisions to the beneficial ownership records. The 5AMLD Directive provides for public access, but it is up to each Member State to decide whether or not they will restrict this.
5AMLD will require that all UK express trusts register
with HMRC, not just those with UK tax consequences (as was the case with 4AMLD).
It will also bring into scope non-EU resident trusts that own UK land or
property. STEP is concerned that under 5AMLD, a much wider range of trusts will
need to be registered. Express trusts may include co-ownership of land, insurance
trusts and other dormant trusts, which will significantly enhance the number of
trusts that need to be reported. The consultation
seeks to clarify the definition of express trusts, which we hope will provide
some clarity and narrow the scope.
Access to the register
There will be expanded accessibility provisions. In the UK, the records will be accessible by law enforcement agencies, any UK obliged entity that enters into a business relationship with a trust, and anyone who can show that they have a ‘legitimate interest’ in the data. An exception is that if a trust has a ‘controlling interest’ in a non-EU company, then anyone will be able to access the information by making a written request and no legitimate interest is required. A trust will be deemed to hold a controlling interest in any corporate or other legal entity when the trust has 25 per cent or more of either the voting shares or other means of control over that entity as defined in the Persons with Significant Control (PSC) guidance. It is currently unclear how legitimate interest applications will be dealt with by the government since ‘legitimate interest’ is not defined within 5AMLD.
The government will need to decide whether or not
requests for trust data meet the definition of legitimate interest. The current train of thought is that those with legitimate interest should
be limited to people with active involvement in anti-money laundering or counter-terrorist
financing activity, or those who have reason to believe or evidence that a
particular trust or person is involved with money laundering or terrorist financing.
We hope that the government will require strong evidence of illegality and/or
wrongdoing that clearly implicates the trust concerned before agreeing to
consider a legitimate interest application. There are many people who seek to
obtain confidential information about individuals and families with wealth for
purposes other than the exposure of illegality or wrongdoing. People are often
keen to obtain information about the affairs of the wealthy and those in the
public domain, for example, and we are concerned that vague assertions of
impropriety could be used to obtain confidential information about family
The consultation does,
however, acknowledge that many trusts are used for children and vulnerable
adults, and requests for personal information on either of these will be given
‘special consideration’ and will possibly even be withheld, which we fully
For trusts already in existence on 10 March
2020, the government proposes a deadline of 31 March 2021 for them to register.
This gives a long lead-in time, given the greater number of trusts that will
need to be registered.
For trusts created on or after 1 April 2020,
the government proposes that the trust should be registered within 30 days of
its creation. The government envisages that this approach will be the most
straightforward, as registration can occur as part of the set-up
process, when the required details should be readily available to
trustees/agents. The proposal for registration within 30 days for new trusts
means there is no single deadline each year and it seems sensible for the trust
to be registered at the same time it is created.
It is also intended that this 30-day
deadline will be used for any amendments that need to be made to the trust
register data, for example, to update an address or change a trustee.
Due to the fact that 5AMLD extends
registration to non-taxpaying trusts, the government considers that the
self-assessment penalty regime is not a suitable basis for the 5AMLD penalty
framework. The new regime is also being consulted on within the paper.
STEP will be submitting a
response to the consultation, which closes on 10 June 2019. The transposition
deadline is December 2019, with an implementation deadline of January 2020. There
is an extended trust register deadline for the UK of March 2020.
Emily Deane TEP is STEP Technical Counsel