STEP puts CRS, transparency and public registers under the SIG spotlight

SIG Spotlight Session Nov 2016STEP hosted its annual Special Interest Group (SIG) Spotlight Sessions on 14 November in London, a day comprising six conference streams. SIGs provide opportunities for members to connect and advance their focused area of practice.

I attended the International Client SIG session, which focused on the needs of practitioners serving international clients with complex planning needs. The presentation was entitled ‘Moving Out, Moving In and Moving On: Key Movements for International Clients’. STEP members John Riches, William Ahern and Dr Angelo Venardos spoke on the topical issues surrounding CRS, transparency and public registers.

The Common Reporting Standard (CRS) continues to cause confusion in some key areas, and STEP is seeking clarification on a number of points surrounding settlors, beneficiaries, protectors, what constitutes a trust, controlling persons that are entities, charitable trusts and private trust companies. William Ahern and Dr Angelo Venardos discussed how CRS is being applied in Hong Kong and Singapore, and they touched upon the inconsistencies in the legislation compared to the UK, for example, anti-avoidance legislation, which is not as comprehensive as the UK’s.

Automatic exchange of tax information on a wide basis will unleash a deluge of confidential and highly sensitive personal financial information for transmission around the world. Differing jurisdictions may have differing issues to consider under these circumstances. Some jurisdictions may also need to consider if their data-protection laws are consistent with the commitments they have made with respect to CRS implementation. Conversely others may have to consider if the confidentiality obligations contained in their trust and banking laws are consistent with their CRS commitments.

The emergence of many corporate and non-corporate trust registers across the globe has caused privacy and compliancy concerns among most practitioners, although the recent non-constitutional ruling of the French trust register may have an influential outcome across Europe in that respect. We continue to wait and assess the new challenges as they arise in this upcoming new era of transparency.

However, the consistent theme across most jurisdictions is the urgent need to consider which jurisdictions are fit and proper to be granted access to an individual’s financial details.

About STEP’s Special Interest Groups

STEP’s SIGs focus on some of the more complex issues families face in planning for their future, including international families, protection of vulnerable people, family businesses and philanthropic giving.

The groups aim to benefit the practitioner, their area of specialisation, the clients they serve, and the industry at large. They are also open to professionals who are not STEP members.

The SIGs are:

• Business Families
• Charities
• Contentious Trust and Estates
• Cross-Border Estates
• International Client
• Mental Capacity
• Philanthropy Advisors

Please see this page for more details: www.step.org/sigs

 

Emily Deane TEP, STEP Technical Counsel

French trust register goes live to public on 30 June

George HodgsonFrance has taken the unprecedented decision to put its register of trusts online and freely accessible this week.

From 30 June the French trusts register can be accessed by using a number of search criteria, including the name of the trust, or identity of the trustee, settlor or beneficiaries.

France obtained this information as trustees of trusts which have a French connection, eg resident settlor, beneficiary and/or holding French assets, have been required to file reports with the French tax authorities since 1 January 2012. Failure to comply is punishable by a fine of at least EUR20,000, or 12.5 per cent of trust assets, if higher.

STEP is highly critical of the move, noting that the data was supplied for tax purposes in good faith, and with no permission for it to be made public.

There is no protection offered for details of vulnerable beneficiaries, such as children, elderly people, or those with limited mental capacity.

This information is strongly biased towards non-French structures, which are being treated on a different basis to French structures.

In addition, there has been no attempt to ensure that the information remains relevant or up to date; nor is there any facility to remove data that is no longer correct.

 

George Hodgson is Interim Chief Executive of STEP

The UK PSC Register: what you need to know

question and answerTransparency has been in the forefront of many people’s minds since news broke of the leak from Mossack Fonseca in Panama.

But those in the know will be aware that the UK government has already taken steps to tackle the issue with the creation of a public register of company beneficial ownership: the PSC (People with Significant Control) Register.

To help members and others we have put together a brief Q&A on the PSC Register, to serve as a quick guide. We have also included a few links to more detailed information at the end.

What is the PSC Register, and why has it been established?

The PSC Register is a statutory public register of companies’ beneficial ownership to be kept at Companies House in London, predominantly to register people with significant control. It will become publicly available via a company search from June 2016.

The idea is to establish greater disclosure and transparency as a means of combatting tax evasion, organised crime and money laundering. It is expected to affect about 2.5 million UK companies and partnerships.

How is ‘People with Significant Control’ defined?

A beneficial owner is an individual who owns or controls over 25% of a UK company either through direct or indirect shareholdings, or who otherwise exercises control or influence over a company or management. This type of control includes, but is not limited to, the ability to appoint and/or remove directors. Beneficial owners must disclose these interests, whether they reside in the UK or elsewhere.

What needs to be disclosed?

The disclosure requirements include the full name, company and residential address, date of birth, nationality, country or state of usual residence of the beneficial owner, including the date of acquiring the beneficial interest, and how it is held. The date of birth and address will not be shown on the public register for privacy reasons. There is a regime for suppressing all information relating to the PSC; however this will only apply in exceptional circumstances, where there is an imminent threat of harassment or intimidation.

What about trusts?

Individuals who control the activities of a trust will need to be recorded as the beneficial owners of that company, where 25% of a company’s shares or voting rights are held in a trust, or where a trust arrangement provides an individual or individuals with control over the company or its management. This will usually require the trust to register the names of the settlor, beneficiary or protector, even though few beneficiaries would exercise any control over the trust. A protector may be registered depending on the amount of control they exercise and if they have the ability to appoint and remove trustees they would be considered to have significant control.

Who does the legislation apply to?

The legislation applies to all UK incorporated companies, including limited liability partnerships, as well as individuals who hold a UK company, through an overseas holding company will also be obliged to register unless they hold a minority interest, in which case they will be exempted.

What about charities?

Charities and social enterprises structured as companies will also be affected, but most will not have PSCs and will simply need to make a note to that effect in the register.

What happens if the information is out of date?

Companies must stay on top of any changes to the registered information that they would be reasonably expected to know and there will be criminal sanctions for anyone who fails to comply which is punishable by fine and/or imprisonment.

Are there any areas of concern to be aware of?

Family businesses will of course be concerned about the impact on their company and its confidentiality since the extent of the business interests and wealth will become public.

An additional concern to businesses is that the register may make UK companies a less attractive investment for investors.

There have also been reports recently highlighting farmers’ inclusion within the PSC requirements. Farming and rural businesses will need to consider how their business is run and who actually owns it– family members with small shareholdings may well qualify as a PSC if they exercise influence over other shareholders and how they vote.

What about the rest of the world?

The international agenda is moving extremely fast in relation to beneficial ownership transparency, with new developments almost every day. George Hodgson covered some of these developments in a previous post – which looked at recent moves towards automatic exchange of beneficial ownership information. With regard to public access, however, the UK is leading the way, and has been calling for other countries to follow suit. The EU’s fourth money laundering directive will soon be introducing corporate registers that will be publicly available to those with a ‘legitimate interest’ in the hope that corporate transparency will also mitigate and deter criminal activity. This comes into effect on 26 June 2016.

Australia has also announced that it would also be establishing public registers, and France plans to make public the register of beneficial ownership of trusts it set up in 2013 (more information).

Last week the Netherlands, Nigeria and Afghanistan promised to launch their own public registers of company ownership, with New Zealand, Jordan, Indonesia, Ireland and Georgia taking initial steps in the same direction.

To date some 40 jurisdictions have signed up to automatically share their beneficial ownership registers, and it seems likely that many more will follow as international pressure builds.

More information on the PSC Register

 

Emily Deane TEP is Technical Counsel at STEP