Out-Law News | 23 Jul 2020 | 9:10 am | 2 min. read
Following a consultation held earlier this year on the changing requirements for trusts to register beneficial ownership information following the implementation of the EU’s fifth anti-money laundering directive (5MLD) in January 2020, the government has published a summary of responses (18 page / 291KB PDF) and clarified the new requirements.
This includes a list of the types of trust which will be exempt from registration due to the low risk of them being used for money laundering or terrorist financing. In addition to the original list of exempt trusts, which included charitable trusts and pension trusts, other structures such as will trusts only receiving assets from an estate are also exempt from the regulations.
White collar crime law expert David Hamilton of Pinsent Masons, the law firm behind Out-Law, said the response would be welcomed by many firms, including insurance and pension providers. He said the government’s “proportionate and measured approach” to trust registration was positive.
Firms would be well-advised to read the response carefully and take professional advice as to whether they benefit from this exemption.
“The 5MLD’s expansion of registration requirements to express trusts irrespective of whether they generate tax consequences had the potential to bring a significant number of structures within scope. The government has, however, acknowledged that many of these are already heavily regulated (such as registered pension schemes) or represent a comparatively low money laundering or terrorist financing risk (such as pure protection or life insurance policies that only pay out on death or serious illness),” Hamilton said.
“The government’s response provides a list of trusts that will be exempt, and firms would be well-advised to read the response carefully and take professional advice as to whether they benefit from this exemption,” Hamilton said.
The response also covered privacy and data protection issues. The 5MLD requires that access to the beneficial ownership information of a trust on the register should be given to those with a legitimate interest in it, or to a third party where a trust holds a controlling interest in an entity domiciled outside the European Economic Area.
The government said it would provide clear guidance to help stakeholders understand the process for requesting information. It said it would not share beneficial ownership information where doing so would lead to a disproportionate risk of fraud, kidnapping, blackmail, extortion, harassment, violence or intimidation; or where the beneficial owner is a minor or otherwise legally incapable.
HMRC access to trust registration data pursuant to 5MLD will open the possibility to proceeds of crime recovery or tax assessments being raised in due course.
White collar crime expert Andrew Sackey of Pinsent Masons said the data provided by the trust registration data would be a useful tool for the authorities.
“HM Revenue & Customs is thought to process more data than any other government department. It has continued to evolve its capabilities and, since being stretched by the Panama Papers data leak in 2016, has implemented cloud based technical solutions to enable it to ingest and risk billions of lines of data annually from sources such as the Common Reporting Standard and the offshore beneficial ownership registers,” Sackey said.
“The addition of trust registration data pursuant to 5MLD will, in respect of non-exempt trusts, complement its understanding of large numbers of settlors and beneficiaries, enabling it to clash that data against historic returns; clearly that will open the possibility to proceeds of crime recovery or tax assessments being raised in due course or, if dishonesty is suspected, a referral to its fraud investigation service where criminal consideration may be given for money laundering or cheat investigations,” Sackey said.
07 Jan 2020