Out-Law News 2 min. read
12 Sep 2022, 2:11 pm
New UK government requirements for trust registration under the anti-money laundering (AML) and counter terrorist financing (CTF) regulations have come into force.
Under Regulation 45ZA of the 2017 Money Laundering Regulations (MLRs), trustees of existing UK express trusts – trusts expressly created, usually in writing, rather than by inference – and certain other non-UK trusts that had entered into business relationships with ‘regulated entities’ subject to the MLRs or acquired interests in land in the UK had until 1 September 2022 to register their trust with HMRC’s Trust Registration Service (TRS).
While the TRS has been in place for some time, previously only trusts subject to tax were required to register. That condition no longer applies, with only a number of carefully-worded exclusions bringing certain lower-risk trusts, including life insurance and registered pension schemes, out of the regime.
1 September 2022 also marked the commencement of Regulation 30A of the MLRs, which imposes a broader range of due diligence requirements on regulated entities regarding trust customers. These entities now required to collect proof of a trust’s registration with the TRS from the customer at the start of their business relationship.
David Hamilton, financial regulation expert at Pinsent Masons, said: “The extension of the TRS has been a long time coming. The message has started to get through to trustees with a recent FOI request to HMRC, by Canada Life, confirming that 61,692 trusts had been registered in the first six months of 2022. This represents a substantial uplift on registrations in 2021. However, it is estimated that around 1,000,000 trusts need to be registered under the new TRS rules so there is still some way to go.”
HMRC has confirmed in guidance on its approach to penalties for late registration that it will not issue penalties for a first offence of failure to register or late registration “unless that failure is due to deliberate behaviour on the part of the trustees.”
David Hamilton warned that the extension of the regime would add to the compliance burdens of regulated firms that regularly do business with trusts.
“Requirements for firms to prove the trust’s registration under the TRS at the outset of the business relationship can create issues for a firm where, for example, it sells an investment product that is placed into a non-exempt trust. The trustee, whose responsibility it is to register the trust with the TRS, may not know of their obligation to register under the MLRs – which has the potential to create issues for the firm when conducting their customer due diligence,” he said.
He added: “Firms will need to maintain clear audit trails of the steps they take to confirm trust customers’ registration status alongside their broader identification and verification measures. From 1 April 2023 firms will no longer be liable under Regulation 30A if they collect an excerpt of the register or show that no such information is held at that time. The compliance burden does not get any lighter when one considers that the amending legislation also proposes to extend the obligation to ‘ongoing’ customer due diligence as well as CDD conducted at the start of the business relationship. Firms will therefore need to build TRS checks into their ongoing CDD triggers.”
An HMRC manual sets out the information that the trustee, who is responsible for registering the trust must provide.
29 Jun 2022