In April 2018, the European Parliament is expected to adopt the EU's 5th Anti-Money Laundering Directive (5AMLD), as agreed by EU Member States on 13th December 2017. In respect of registers of trusts, the following was agreed:
- Member States will have to grant public access to information held on each Member State's register of trusts, subject to a "legitimate interest" test, the conditions for which must be defined in law by each individual Member State.
- Access to the register of trusts must also be granted to any member of the public in relation to a trust which holds or owns a controlling interest in a company that is not incorporated in the EU (and is therefore not included in any Member State's register of beneficial ownership of companies);
- Member States must put in place mechanisms to ensure that information on beneficial ownership in the registers of companies and trusts is "adequate, accurate and current"; and
- Member States will have to ensure interconnection between each Member States' registers of companies and trusts via an EU "Central Platform".
The UK government heralds the agreement on 5AMLD as being in line with the UK's negotiating priorities, including public access to the UK's register of trusts being subject to a "legitimate interest" test.
In a letter to the House of Commons' European Scrutiny Committee on 17th January 2018, HM Treasury Economic Secretary John Glen said that the UK register of trusts is a valuable tool for law enforcement authorities that can access information held on it, but the Government is opposed to granting full public access to such information so as to protect individual privacy rights. Mr Glen continued that the provisional political agreement on these proposals gives Member States the right to define who should be considered to have a "legitimate interest" in information held on national registers of trusts. In this regard Mr Glen said that the Government will consider how best to consult with interested stakeholders on how "legitimate interest" should be applied in the UK in view of the fact that many trusts are established for personal or family reasons. Additionally, Mr Glen said that the proposals do not impose obligations upon trustees to register on national registers in multiple Member States which would be disproportionate and imposing needless costs upon trustees.
However, Peter Dowd, the Shadow Chief Secretary to the Treasury said, whilst speaking primarily about the UK's new public Register of UK Property Ownership (which will identify the ultimate beneficial owners of UK realty held by all foreign entities capable of owning UK property, albeit it is expected that trust beneficiaries will not be named as they are already subject to beneficial ownership disclosure obligations), that the UK Government needs to tackle the introduction of full public registers of offshore trusts in the Crown Dependencies and the Overseas Territories. This comment seems to be in direct contrast to the current position adopted by both the UK Government and the EU pursuant to 5AMLD in that access to registers of trusts is required to be subject to a "legitimate interest" test.
5AMLD's introduction will be staggered over two to three years as follows:
- The enhanced access to registers of trusts will take effect in January 2020; and
- The interconnected Central Platform of registers of companies and trusts is slated to take effect early 2021, the same year the Register of UK Property Ownership is due to come into effect.
We shall wait to see what stance the Crown Dependencies and the Overseas Territories take in respect of registers of trusts both in terms of their introduction and their accessibility.
This article first appeared in the May/June 2018 issue of Contact, The Channel Islands Business Magazine.
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