The Fourth Anti-Money Laundering Directive (4AMLD), which sets out EU-wide anti-money laundering and counter-terrorism rules, has now been transposed for the most part by the European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2016 and the Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Act 2018 and most recently, European Union (Anti-Money Laundering: Beneficial Ownership of Trusts) Regulations 2019 (the Regulations) which came into effect on 29 January 2019.
Since November 2016, companies have been obliged to maintain an internal beneficial ownership register (please see our previously published overview and in-depth guide on internal registers for corporate entities). Now, the Regulations introduce similar obligations for trusts which fall within their scope. Since 29 January 2019, trusts have been obliged to maintain an internal “express trust (beneficial ownership) register” or beneficial ownership register (the BOR).
When do the Regulations come into force?
The Regulations came into force immediately on 29 January last and do not provide for a transitional or ‘grace’ period. The obligations set out under the Regulations are therefore now in effect in respect of any “express trust”.
What type of trusts fall within the scope of the Regulations?
The scope of the Regulations is broad as neither they nor 4AMLD define or limit what is to be considered an “express trust”. For example, the Regulations apply to collective investment schemes constituted as trusts, as well as other common commercial, employment and financial trust-based arrangements such as security trusts, charitable trusts, pension schemes, real estate trusts, employee share schemes, and declarations of trusts appointing nominee shareholders.
Who is a beneficial owner?
A ‘beneficial owner’ is any individual who ultimately, either directly or indirectly, owns or controls the trust and includes the settlor or settlors, the trustee or trustees, the protector or protectors (if any), the beneficiaries or the class of persons in whose main interest the trust is established.
Who is responsible for the BOR?
A trustee or a manager in the case of a collective investment scheme constituted as a trust must establish and maintain the BOR (In this article, trustee includes both trustees and such managers). They must take “all reasonable steps to obtain and hold adequate, accurate and current information” regarding beneficial owners of the trust. The BOR must be kept up-to-date and capture changes in beneficial ownership as they occur. These records must be retained for at least five years. After that time, the records must be deleted unless the trustee is required to retain them by law (for example, for the purpose of court proceedings). The trustee must obtain the consent of the person to whom the information relates should they wish to retain records after the five-year expiration period.
What information must be held?
The Regulations apply to all express trusts whose trustees are resident in Ireland or those trusts which are administered in Ireland. Trustees are required to obtain and hold the following information on beneficial owners: name, date of birth, nationality, residential address, the date on which he or she was entered into the register, and the date on which he or she ceased to be a beneficial owner.
Who may access the BOR?
Access to the BOR must be granted, where requested, to certain authorities, which include the Revenue Commissioners, the Central Bank of Ireland, the Minister for Justice or other competent authorities which the Minister may prescribe. The Property Services Regulatory Authority is such a prescribed competent authority. Those authorities may disclose relevant information obtained in the BOR to their corresponding competent authorities in other EU Member States. See also our comments below regarding the Fifth Anti-Money Laundering Directive (5AMLD).
Obligations in dealings with ‘designated persons’
The Regulations have introduced obligations on trustees where they enter into an “occasional transaction”, which the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 (the 2010 Act) prescribes to be any transaction which requires the application of customer due diligence measures, or form a business relationship with a “designated person”. The 2010 Act defines a “designated person” to include a bank or financial institution, auditor, accountant or tax advisor, estate agents, letting agents, auctioneers, or solicitors. Trustees are obliged in such dealings to:
- inform the designated person in writing that he or she is acting as a trustee;
- where requested by the designated person, to provide promptly information identifying all the beneficial owners of the trust; and
- update the designated person within 14 days if there is any change in such information.
Are the beneficial ownership obligations on trustees the same as those on companies?
There are many similarities between the obligations introduced by the Regulations and those in place for companies and industrial and provident societies (IPSes) since 2016. Some key duties which arise in respect of the beneficial ownership registers of companies and IPSes and those of trusts are:
- the minimum shareholding thresholds which apply to companies and IPSes do not apply to trusts so anyone who falls within the above categories of beneficial owner described above must be recorded in the BOR.
- A trustee must take “all reasonable steps” to identify beneficial owners but is not under as onerous an obligation as companies and IPSes to identify beneficial owners, e.g. a trustee is not obliged to issue notices to persons they believe to be beneficial owners whereas companies and IPSes are.
A trustee who fails to maintain a BOR or conduct their dealings with designated persons in compliance with the Regulations faces a fine of up to €5,000.
Trustees must act without haste to familiarise themselves with their obligations under the Regulations and to ensure compliance with the Regulations, which will involve the immediate establishment and maintenance of their trust’s BOR, and putting policies, processes or measures in place to ensure that the information in the BOR is adequate, accurate and current, and that records are retained for no longer than required. Further Future Reform: The Central Register of Beneficial Ownership is on the way
4AMLD required each EU member state to establish central registers of beneficial ownership of companies and IPSes and of trusts (the RBOs) by 27 June 2017. In July 2018, 5AMLD came into force and extended the deadline for introducing the RBO of express trusts to 10 March 2020. The information on beneficial ownership of trusts which must be collated and maintained in BORs in line with the Regulations will be used to populate the RBO for trusts. It is not yet known which department, statutory body or agency will be responsible for developing and maintaining the RBO for trusts. The RBO for trusts when established will be accessible to competent authorities, such as those mentioned above, financial intelligence units, and also “any natural or legal person that can demonstrate a legitimate interest”. This last category was introduced by 5AMLD although it stops short of the register being available to the public, as will be the case for the RBO for companies and industrial and provident societies.
4AMLD and 5AMLD also require that the European Commission will facilitate interconnectivity of all central registers of member states by 10 March 2021.