The recent introduction of the EU (Anti-Money Laundering: Beneficial Ownership of Trusts) Regulations 2021, is the latest in a series of anti-money laundering legislation introduced in Ireland that is driven from EU Directives ((EU) 2015/849 (“4AMLD”), as amended by Directive (EU) 2018/843 (“5AMLD”)). Salvador Nash and Andrea Sherlock of our Legal Services practice explain.

These Regulations revoke 2019 Regulations for trusts and mirror the disclosure of beneficial ownership obligations for Companies and Industrial and Provident Societies that have been in place since 2019 [Ireland creates Central Public Register of Beneficial Ownership of Corporates (home.kpmg)]. The overall aim of the EU Directives is to prevent the use of the financial system for money laundering or terrorist financing and is part of a number of measures to lift the veil of corporate secrecy on financial transactions by identifying the individuals who own or control legal structures. In this update we consider the new obligations for trustees of relevant trusts, we re-cap briefly on the existing obligations for corporates, provide a reminder of the Central Banks register of beneficial ownership for certain financial vehicles including ICAVs, Unit Trusts and Credit Unions and highlight the beneficial ownership requirements for Investment Limited Partnerships and Common Contractual Funds, in what is becoming a heavily regulated environment with a growing burden of compliance for all types of legal structures.

The EU (Anti-Money Laundering: Beneficial Ownership of Trusts) Regulations 2021

(the “2021 Trust Regulations")

The 2021 Trust Regulations came in to force on the 24 April 2021 and replaced and expanded the trust regulations introduced in January 2019, which required trustees of an express trust to set up a register of beneficial ownership. Although the definition of trusts in scope has been narrowed, the obligation on trusts in scope to maintain a register of beneficial ownership still exists (the “Trust Register”). Additional obligations have also been imposed including the obligation to file on a new central register of beneficial ownership of trusts (the “Central Trust Register”) to be maintained by a new registrar appointed by the Revenue Commissioners (the “Trust Registrar”).

Trusts in Scope

The 2021 Trust Regulations apply the definition of a relevant trust in the Criminal Justice (Money Laundering and Terrorist Financing) Act of 2010 (as amended in 2021) (the “2010 Act”).

A relevant trust is an express trust established by deed or other declaration in writing and any other arrangement or class of arrangements as may be prescribed (but not including an excluded arrangement) and:-

  • the trustees of the relevant trust are resident in Ireland, or the relevant trust is administered in Ireland;

or,

  • if none of the trustees are resident in the EU, and the trust is not otherwise administered in the EU, then the relevant trust is in scope if a trustee (acting for the trust) enters into a business relationship in Ireland or acquires land or other real property in Ireland in the name of the trust.

Excluded arrangements are listed in the 2010 Act and include:-

  • Approved pension schemes, retirement funds, and profit sharing schemes/employee share ownership trusts pursuant to Part 17, TCA 1997;
  • Trusts for restricted shares under s128D TCA 1997;
  • Unit trusts on the Central Register of Beneficial Ownership of Irish Collective Asset-management Vehicles, Credit Unions and Unit Trusts;
  • Any such other arrangement as may be prescribed by the Minister for Finance (no further arrangements have been identified yet).

Although, the exclusion of the above arrangements is helpful, the scope of the 2021 Trust Regulations does have a wide reach capturing the following arrangements if established by deed / writing:-

  • Bare trusts and nominee arrangements;
  • Foreign trust arrangements if administered in Ireland;
  • Commercial agency arrangements;
  • Powers of attorney;
  • Security trustees;
  • Tax exempt charitable trusts.

Commentary

The exclusion of certain trusts from the scope of the regulations will be welcomed in certain quarters, particularly pension schemes who were faced with both the task of submission and their members details appearing in a central register.

However, the scope extends to nominee arrangements, the most common being a person holding shares in a company for the benefit of another (either for confidentiality reasons or to meet minimum shareholder requirements).

Beneficial Owner

The meaning of a beneficial owner in the 2021 Trust Regulations is also applied from the 2010 Act which defines a beneficial owner of a relevant trust as:-

  • Any individual, or class of individuals in whose interest the trust is set up or operates, or who is entitled to a vested interest in the capital of the trust property;
  • Any individual who has control over the relevant trust;
  • the settlor;
  • the trustee(s);
  • the protector (if any).

Commentary

The Regulations are specific and mandatory when determining a beneficial owner of a relevant trust with no optionality. For example, a settlor who no longer has any role and is not a beneficiary of the relevant trust is still regarded as a beneficial owner. A bespoke definition of beneficial ownership is provided for amateur sport bodies and unincorporated charities, bringing these bodies into the scope of the 2021 Trust Regulations.

Duties of Trustees include:

1. Obtain Beneficial Ownership details and maintain Trust Register

Trustees must take all reasonable steps to obtain and hold adequate, accurate and current information in relation to the relevant trust’s beneficial owners. The information required replicates the information the trustees’ were obliged to maintain under the now revoked 2019 trust regulations being, the name, date of birth, nationality and residential address of each beneficial owner. However the following additional information must now also be obtained:-

  • a statement of the nature and extent of the interest/control attributed to each beneficial owner;
  • the PPS number of each beneficial owner or where no PPS number has been issued certain forms of verification as prescribed.

Where a legal entity is a beneficiary of the relevant trust and the beneficial ownership details of that entity are:-

  • recorded on another central register, the trustee is only obliged to obtain and hold the name and registered address of the legal entity, the filing number from the other central register and a statement of the nature and extent of the interest held / control exercised by it, in relation to the relevant trust;
  • If not so recorded on another central register, it will be necessary for the trustees to take all reasonable steps to obtain and hold the information for any individuals constituted through that legal entity as beneficial owners of the trust.

2. Give notice to beneficial owners

Where a trustee has reasonable cause to believe an individual is a beneficial owner of a relevant trust, the trustee is obliged to give notice to the individual to confirm whether this is the case and to confirm or correct the particulars to be entered in the Trust Register. The obligation to give notice in this manner is discharged if the trustee has already been informed of the status of an individual’s beneficial ownership and their required particulars, which were provided either by the beneficial owner or with their knowledge.

Where a trustee believes there is a change to the information held on the Trust Register, the trustee must give notice to the individual beneficial owner to confirm the changes. Similar to above, the obligation to give notice in this manner is discharged if the trustee has already been informed of the change and same was provided either by the beneficial owner or with their knowledge.

A trustee is also entitled to give notice to any person believed to have information on the beneficial ownership of the relevant trust.

3. Filings to Central Trust Register

Trustees must deliver the beneficial ownership information to the Central Trust Register:

  • For existing trusts: within 6 months from commencement of the Regulations, i.e. 23 October 2021;
  • For newly established trusts: within 6 months from coming into existence.

The information to be delivered by a trustee to the Central Trust includes:-

  • Name, date of birth, nationality, residential address of each beneficial owner;
  • Statement of nature and extent of interest held/control exercised by each beneficial owner;
  • The class of individuals who are the beneficiaries if that is the case;
  • If a legal entity is a beneficiary recorded on another register in the EU corresponding to the Central Register - the name and address of the legal entity, a statement of the interest held/control exercised and the filing number;
  • PPS/foreign tax reference number (for verification purposes only).

In situations, where beneficial ownership information is already held on another register in the EU corresponding to the Central Register, the trustee can satisfy its filing obligations by procuring a certificate from the corresponding registrar, stating that trust information has been filed in that other register and by holding that certificate in Ireland, for the purpose of making it available for inspection, if required.

Changes made to information on the Trust Register must be filed on the Central Trust Register within 14 days.

Commentary

A trustee is obliged to maintain “adequate, accurate and current” information in respect to its beneficial owners. The time lag between now and 23 October 2021 will provide time for trustees to get to a position whereby they have complied with the provisions of the 2021 Trust Regulations and thereby be in a position to file their beneficial ownership information. That information must be filed using electronic means and details of that system and the individual in Revenue who will be the Trust Registrar are awaited.

4. Disclose information to Designated Persons

Where a trustee, on behalf of the trust, enters into an occasional transaction (i.e. a transaction which requires customer due diligence procedures) or forms a business relationship with a designated person the trustee must inform the designated person that it is acting as trustee and if the designated person is following customer due diligence measures, provide information on both the legal and the beneficial ownership of the relevant trust. Designated persons are defined in the 2010 Act and include:-

  • a credit/financial institution;
  • an auditor, external accountant or tax adviser;
  • a relevant independent legal professional;
  • a trust or company/property service provider.

Additionally, on request from the designated person, the trustee must provide in a timely manner information identifying all the beneficial owners of the relevant trust and notify the designated person of any change to the Trust Register within 14 days of becoming aware of the change.

5. Disclose information to Garda Síochána, Revenue, CAB or a Competent Authority

The trustee of a relevant trust is also obliged to provide any member of the Garda Síochána, the Revenue Commissioners, a Competent Authority (e.g. Central Bank of Ireland, accountancy body, etc.) or the Criminal Assets Bureau (“CAB”) with timely access, on request, to the Trust Register (not including the PPS/identification number).

These authorities may disclose the information to any corresponding competent authority of another Member State where a request is made by that corresponding authority.

Duties of Others

Duty of beneficial owner to notify status or a change

Where an individual is, or ought to know that they are, a beneficial owner and the individual’s details are not included on the Trust Register, the individual must provide their details to the trustee in writing within 2 months. A similar obligation applies in regard to any changes.

Duty of Designated Persons

A designated person must notify the Trust Registrar of any discrepancies that it identifies between the Trust Register and the Central Trust Register.

Duty of Garda Síochána, Revenue, CAB or a Competent Authority

Similarly, if any of the above identify a discrepancy between the Trust Register and the Central Trust Register, they must notify the Trust Registrar, unless it would interfere unnecessarily with the performance of their functions.

Access to Central Trust Register

Unrestricted Access

The Central Trust Register, unlike the Corporate Central Register, is not open for inspection by the public. However, high ranking officers from, the Garda Síochána, the Financial Intelligence Unit Ireland, the Revenue Commissioners, CAB and Competent Authorities (engaged in the prevention, detection or investigation of possible money laundering or terrorist financing) will have unrestricted access.

Information on the Central Trust Register may also be disclosed to a corresponding competent authority in another Member State.

The Trust Registrar is legally obliged not to alert the beneficial owners that access is in the process of and/or has been granted to the Trust Register and their information.

Restricted Access

Restricted Access, detailing the name, month and year of birth, nationality, country of residence and statement of nature and extent of interest held/control exercised, can be provided to the following:

  • A designated person.
  • Any person where they demonstrate to the Trust Registrar that they have a legitimate interest for inspection, by making a submission to the Trust Registrar, that:
    • The person is engaged in the prevention, detection or investigation of money laundering or terrorist financing offences and the information is required for this activity, and
    • The relevant trust concerned is connected with persons convicted of an offence (anywhere) consisting of money laundering or terrorist financing or holds assets in a high-risk third country.
  • Any person on request in writing in regard to a relevant trust that holds or owns a controlling interest in any corporate or other legal entity incorporated outside the EU, whether through direct or indirect ownership (including through bearer shareholdings), or through control by other means. Notably this provision does not include a “legitimate interest” requirement.

Commentary

The Central Register is not available to members of the public. Other than a designated person, the bar is very high for other persons to access information on the Central Register. Even if those persons (perhaps journalists) can demonstrate that they have a legitimate interest, they have to demonstrate that the relevant trust concerned is connected with persons convicted of a money laundering or terrorist financing offence or holds assets in a high-risk third country.

Restricted access to information allowed to designated persons or other relevant individuals must also be in compliance with the Data Protection Act 2018.

EU (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2019

(the “2019 Corporate Regulations”)

In some ways the new obligations introduced for relevant trusts under the 2021 Trust Regulations mirror the obligations for Corporates and Industrial and Provident Societies that have been in place since 2019 [Ireland creates Central Public Register of Beneficial Ownership of Corporates (home.kpmg)], including the severity of sanctions for non-compliance which on conviction on indictment can result in a fine of up to €500,000.

Although there are some differences, one notable being that access to the Central Trust Register is limited while the 2019 Corporate Regulations allow public access regardless of any legitimate interest, albeit that public access is to restricted information. Furthermore the 2021 Trust Regulations do not provide a percentage threshold that a beneficiary of a relevant trust must satisfy to be identified as a beneficial owner, which for corporates is set at >25% ownership or control.

Interestingly, the Corporate Registrar has recently announced that to date the compliance rate for filings on the Central Corporate Register is as high as 82%, although she did concede that this percentage was only in respect to filings that had been made. Therefore, this does not necessarily provide evidence of the Central Corporate Register being adequate, accurate and current as required under 5AMLD.

Accordingly, Corporates which have not yet made any filings on the Central Corporate Register (deadline was 22 November 2019) or have not made updates for any required changes should be aware of the following recent legislative updates and announcements that could affect their business relationships and could also be a pre-cursor to a commencement of proceedings for non-compliance:-

  • the 2010 Act has just recently been amended to provide that prior to the establishment of a business relationship with a corporate, a designated person is obliged to ascertain that the beneficial ownership information of the corporate is entered on the Central Corporate Register:-
  • under the 2019 Corporate Regulations a designated person had an obligation to report to the Registrar of Corporates a discrepancy in the information on the Central Corporate Register and the information provided to them;
  • the Registrar of Corporates has recently updated their website to provide a facility for reporting discrepancies by uploading a new prescribed form;
  • the Registrar of Corporates announced that a review to identity corporates that have not filed on the Central Corporate Register, which had been paused due to the Covid-19 pandemic, has re-commenced and “reminder notices” were being issued to those who have yet to file.

Commentary

A designated person includes a bank. In excess of 20,000 companies are incorporated in Ireland each year, a significant portion of whom will need a bank account. Prior to a bank account becoming operational, the bank has to check that the beneficial ownership details have been filed in the Central Corporate Register. Additionally, should the bank form an opinion that there is a discrepancy between the beneficial ownership shown in the Central Corporate Register and that provided to them, then they are legally obliged to report the discrepancy to the Registrar of Corporates. Once notified, the Registrar of Corporates may make an appropriate entry in the Central Corporate Register and serve notice on the company to clarify the discrepancy and/or to file such information to resolve the discrepancy. Additionally, if the senior managing officials (e.g. directors) are recorded as the beneficial owners, then the bank has to verify the identity of each senior managing official. These requirements also apply to relevant trusts, ICAVs, Unit Trusts, Credit Unions, Investment Limited Partnerships and Common Contractual Funds.

Central Beneficial Ownership Register

For ICAVs, Unit Trusts and Credit Unions

The European Union (Modifications Of Statutory Instrument No. 110 Of 2019) (Registration Of Beneficial Ownership Of Certain Financial Vehicles) Regulations 2020 were introduced to capture certain financial vehicles including ICAVs, Unit Trusts and Credit Unions ("CFVs") and required CFVs to maintain an internal register of their beneficial owners and to report this information to a new Central Register maintained by the Central Bank of Ireland. Any changes in beneficial ownership must be updated in an internal register and then filed on the Central Register of CFVs within 14 days.

Investments Limited Partnership (Amendment) Act 2020

While 4AMLD and 5AMLD did not require the establishment of beneficial ownership registers for Investment Limited Partnerships and Common Contractual Funds, the above Act now extends those requirements to these fund vehicles. In addition to maintaining a register of beneficial ownership, that information must now be submitted to the Central Bank for inclusion on the Central Register for each such fund vehicle.

Summary

Whether such measures, introduced to meet Ireland’s obligations under 4AMLD and 5AMLD, will tackle and reduce the use of corporates, trusts and fund vehicles in fraudulent crime and money laundering remains to be seen. Trustees of trusts in scope now have a new compliance deadline (for existing trusts 23 October 2021) and similar to corporate directors will have continued ongoing obligations for disclosure of beneficial ownership, all of which come with risks of punitive sanctions for non-compliance.

Get in touch

If you have concerns about beneficial ownership, or any company secretarial queries, please contact Salvador Nash or Andrea Sherlock of our Legal Services team.

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