The European Parliament voted on 11 March 2014 on amendments to the draft Fourth Money Laundering Directive including the issue of whether public registers of trusts should be introduced in the EU. The vote was overwhelmingly in favour (643 votes to 30). The draft Directive now goes to the European Commission and Council of Ministers at the end of the month. If the current proposals go through, they could have a far-reaching impact on trusts in the UK.

The draft Directive would involve each EU country having to create and maintain a public register of all trusts, putting on public record the identity of the trustees, settlor, protector, and any beneficiary with an interest in 25% or more of the trust's capital. Name, date of birth and nationality will all have to be disclosed. If the trust is discretionary, such that no one beneficiary owns a 25% share, we understand that the beneficiaries must be disclosed as a class.

At present in the UK, there is no such public register, and trusts are confidential to those that create them and are involved with them. With large family trusts in particular, this type of information is highly sensitive and private, and such a register is bound to be seen as an unnecessary invasion of privacy.

The driving force behind the plans is the counteraction of tax avoidance. The UK is one of very few countries in the EU that uses trusts, and the rest of the EU views them with suspicion as vehicles for tax avoidance and money laundering, which is in fact rarely the case. The Society of Trust and Estate Practitioners ("STEP"), the professional body for private client practitioners, has actively voiced its opposition to the proposals, highlighting how they would impose significant administrative burdens and costs on UK families, threaten families' basic rights to confidentiality in financial affairs, and do little in practical terms to tackle the problem of illicit financial flows (See more at: http://www.step.org/anti-money-laundering#sthash.kOICXOo5.dpuf).

Equally, the UK government has gone on record to say that whilst it supports public registers disclosing the beneficial owners of companies, it does not support the same transparency for trusts. However at present, although the UK MEP was able to water-down some of the provisions of the draft Directive at committee stage (including to prevent trust documentation from being disclosed), the UK's position is not generally supported by the rest of the members states.

We await any developments in the forthcoming votes on the draft Directive, the next of which we understand is on 26 March 2014 in the Council of Ministers, but with the support that the proposals have so far, it is unlikely that there will now be a turnaround.

We will be closely tracking the Directive and the impact it may have on our clients' trusts.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.