On 15 April 2019, the United Kingdom (UK) launched a consultation on the transposition of the requirements related to the European Union (EU) Fifth Anti-Money Laundering Directive (5AMLD).
The 5AMLD changed the scope of requirements related to registers of beneficial owners of companies and trusts as compared to previous EU Directives.
The UK’s central register of corporate beneficial owners is already available to the public. The consultation suggests that the scope and operation of the UK corporate register is already broadly aligned with 5AMLD requirements. This is except for the requirement to introduce additional mechanisms to identify and act upon discrepancies related to beneficial owner details on the register that are found by competent authorities.
The UK’s regime for registering and reporting details of beneficiaries under express trust arrangements will be expanded in scope. It is proposed that the first registration and reporting requirements will apply for existing trusts from 31 March 2021.
Once the new regime is in effect, it is proposed that new trusts will be obliged to register with the UK’s central Trust Registration Service (TRS) within 30 days of set up. Trustees will be required to report changes in reportable information to the TRS, e.g. changes in trust beneficiaries, within 30 days.
The current trust registration obligation is confined to trusts with defined tax consequences. Existing reporting obligations for these trusts will remain but a new population of trusts will be obliged to register and report details of beneficial owners to the TRS.
The scope of the obligation to register the trust and report details to the TRS is to be expanded to include:
The extended scope of the reporting is expected to include discretionary trusts, bare trust arrangements, employee ownership trusts and charitable trusts.
The consultation outlines the information reportable in relation to settlors, beneficiaries, etc. who are companies or natural persons. In the case of individuals, the reportable information includes the individual’s full name, date of birth, nationality, country of residence and the nature of the individual’s role in relation to the trust, e.g. settlor, beneficiary, etc.
It is not intended that the current scope of reporting information for trusts with tax consequences (which includes asset value details) will be extended to this new population of trusts.
The consultation suggests that some of the current information reporting requirements for trusts with tax consequences may be reduced in future as it has been found to be onerous in practice.
It appears possible that the UK may require reporting information in addition to that specified in the 5AMLD in order to validate the identity of disclosed persons and to distinguish between EU and non-EU trusts (to which different international information exchange obligations apply).
The potential scope of application of the reporting requirements to non-EU trusts where there is one UK trustee and the trust establishes an ongoing business relationship in the UK with, for example, an accountant or legal advisor, is set out at paragraph 9.19 in the consultation document.
The consultation recognises that the use of trusts is common in many commercial and private spheres due to the common law legal framework in the UK. In some cases, it may be that trust arrangements in the UK are the equivalent of contractual arrangements in other EU Member States that are not reportable on their trust registers because they are not considered to be trusts under their laws.
Although there is no de minimis threshold for exclusion of express trusts from the scope of reporting under 5AMLD, the consultation suggests that the UK government is minded to take into account the use and equivalence of trust arrangements in the UK with contractual arrangements in civil law jurisdictions when setting the scope of the reportable arrangements. This may be relevant, for example, in the context of trusts used to enforce lender security arrangements.
EU trusts are only required to register in the EU once. EU resident express trusts that are entered on a register in another Member State do not need to register and report to TRS once they have proof of EU registration.
Details on the UK central trust register will not generally be available to the public.
This is with the exception of persons who have a ‘legitimate interest’. The consultation suggests that the UK is minded to define legitimate interest relatively narrowly and to confine it to matters related to money laundering and terrorist financing. This could mean that ‘public’ access is confined to persons who provide evidence that their interest in accessing the trust register information is because of a person’s suspected involvement in money laundering or terrorist financing activities. It is also suggested that additional protections would be available to prevent access to information relating to trust beneficiaries who are minors.
Many of the new requirements under the 5AMLD relate to enhanced due diligence procedures to combat money laundering and terrorist financing, e.g. in establishing the source of funds and the identity of beneficial owners, and apply to persons such as letting agents, banks and accounting firms.
The consultation document is available here. The consultation closes on 10 June 2019.
If you consider that you or your business could be affected by the proposed extension of these reporting obligations, please contact a member of your KPMG team to discuss this further.