The Government’s proposals for complying with new trust registration and disclosure requirements under the EU’s Fifth Money Laundering Directive
HMRC has issued its consultation paper seeking views on the Fifth Money Laundering Directive (5MLD). As indicated in earlier bulletins the scope of the UK Trust Register is being extended. The 4MLD placed a requirement on the UK to create a register for all express trusts that incur a UK tax consequence which resulted in HMRC setting up the Trust Registration Service (TRS) in 2017. The 5MLD expands the scope of this register by requiring all UK express trusts to register whether or not they incur a UK tax consequence.
The Government has not specified the definition of express trust however we believe that the following will likely fall within the definition of an express trust and therefore will have to register:
- discretionary trusts;
- interest in possession trusts;
- many types of bare trusts;
- charitable trusts;
- employee ownership trusts.
For those unregistered trusts already in existence on 10 March 2020, the Government proposes a deadline of 31 March 2021 for them to register on TRS. This gives a long lead in time given the greater number of trusts that will need to be registered.
For trusts created on or after 1 April 2020, the Government proposes that the trust should be registered within 30 days of its creation. The Government envisages that this approach would be the most straightforward, as registration can occur as part of the set-up process, when the required details should be readily available to trustees/agents.
In addition, under 5MLD, the Government will be required to disclose specific data about a trust and the beneficial owners of it held on the register to law enforcement agencies in line with existing requirements under 4MLD. Data on specific trusts will be shared under three circumstances:
- with ‘obliged entities’ that enter a business relationship with a trust;
- with persons who can demonstrate a ‘legitimate interest’ in access to information on the beneficial ownership of a specified trust;
- with persons who want to know about trusts with a controlling interest in a non-EEA company.
‘Obliged entities’ are those individuals or businesses that are supervised by a UK supervisory authority for compliance with obligations established by 4MLD or 5MLD.
The Government considers someone who has a ‘legitimate interest’ in this data will:
- have active involvement in anti-money laundering or counter-terrorist financing activity;
- have reason to believe that the trust or person that is the subject of the legitimate interest enquiry is involved with money laundering or terrorist financing: in other words, speculative enquiries into all or multiple trusts on TRS will not be deemed legitimate;
- have evidence underpinning that belief.