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Information on beneficial owners of trusts to be available to those with a 'legitimate interest', EU parliament agrees

Changes to EU rules on anti-money laundering and counter terrorist financing designed to increase transparency on who really owns companies and trusts have been agreed in principle by the European parliament and the European Council.

These include measures to enable trust beneficiary information to be accessible by those with a 'legitimate interest', as well as by tax authorities and regulated professionals.

"There have been calls from campaigners for trust registers to be made publicly available. This proposal falls short of this, but it is not clear how 'legitimate interest' will be defined and whether it will include NGOs or investigative journalists. If it is left to individual states to define legitimate interest we are likely to see a divergence of interpretations," said Paul Noble a tax investigations expert at Pinsent Masons, the law firm behind Out-law.com.

Under the proposal registers of ownership of companies will be publicly accessible. The Commission said that this "will enhance public scrutiny and will contribute to preventing the misuse of legal entities for money laundering and terrorist financing purposes".

The changes mean that access to information about the beneficial owners of trusts will be freely accessible to the authorities and professionals subject to anti-money laundering rules, such as banks and lawyers. Trust beneficiary information will also be accessible to others who can 'demonstrate a legitimate interest'.

Where a trust is a beneficial owner of a company, information about the beneficial owner of the trust will be obtainable by written request, according to a factsheet published by the Commission.

It is planned that registers maintained by each EU state on beneficial ownership information will be interconnected to facilitate cooperation and exchange of information between EU states. EU member states will also have to put in place verification mechanisms of the beneficial ownership information collected by the registers to help improve the accuracy of the information and the reliability of these registers.

The changes were proposed by the European Commission in July 2016 in the wake of terrorist attacks and the revelations of the Panama Papers, and are part of the Commission's action plan of February 2016 to strengthen the fight against terrorist financing.

The measures will be introduced by amending the EU's Fourth Anti-Money Laundering Directive (4AMLD) which came into force in June 2015, and had to be transposed into national law by EU member states by 26 June 2017. The changes still need to be formally endorsed by the European parliament and the Council. EU states will then have up to 18 months to transpose the new rules in their national legislation. Whether the UK is obliged to make the change will depend upon the Brexit arrangements.

Since 6 April 2016, most UK companies have been required to formally identify and keep a register of the individuals who are ‘persons with significant control’ (PSC) over them and to include this information in an annual return. The information on PSCs is available for public inspection

Since 26 June 2017, trustees of UK trusts and of non-UK trusts with UK tax liabilities have been obliged to maintain accurate and up-to-date records of all the beneficial owners of the trust. They are also required to report beneficial ownership information annually to HM Revenue & Customs (HMRC) to be kept on a UK register of trusts. The register is currently only accessible by tax and law enforcement authorities.

The first information for existing trusts was originally to have been provided to HMRC by 31 January 2018. However, the Government has recently confirmed that for the first year of operation of the Trust Registration Service they will not impose penalties on trustees of existing trusts so long as they have registered the trust by 5 March 2018. However, trusts which have incurred a liability to income tax or capital gains tax for the first time in the tax year 2016 to 2017 are still obliged to register by 5 January 2018.

Other changes agreed in principle to 4AMLD are designed to prevent risks associated with the use of virtual currencies for terrorist financing and limit the use of pre-paid cards. There will also be added safeguards for financial transactions to and from high-risk third countries.

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