The European Union (Anti-Money Laundering: Beneficial Ownership of Trusts) Regulations 2019 came into effect in late January 2019. They transposed into Irish Law certain sections of Article 31 of the Fourth Anti-Money Laundering Directive (EU 2015/849) (AMLD4). We examine the scope of the new Regulations which impose new and immediate obligations on trustees to establish and maintain a register of a trust’s beneficial owners.
Are all trusts affected by the Regulations?
The Regulations have broad application and apply to all trusts defined as "an express trust whose trustees are resident in the State or which is otherwise administered in the State". Accordingly, constructive or implied trusts are not covered by the Regulations.
For collective investment schemes constituted as trusts, the Regulations state that the trustee also includes the manager or operator of the collective investment scheme. Therefore, the obligation to identify and maintain a register of beneficial owners applies to both the depositary and the manager/AIFM of collective investment schemes.
Who is the ‘Beneficial Owner’?
The definition of a beneficial owner of a trust in the Regulations is given the same definition as in AMLD4. This includes:
The settlor, trustees, protector (if any), beneficiaries or, other persons in whose main interest the trust is set up or operates for, and
Any individual who has ultimate ‘control’ over the trust by means of direct or indirect ownership or by other means
The Regulations do not specify a minimum beneficial ownership threshold below which trustees are exempt from the requirement to maintain records of a trust’s beneficial owners.
What are the new obligations?
1. Duty to obtain and hold information on beneficial owners
Trustees are required to take ‘all reasonable steps’ to obtain and hold ‘adequate, accurate and current information in respect of the trust's beneficial owners’.
On a practical level, this means contacting the trust or scheme’s ultimate owners and obtaining details of the beneficial owner’s name, date of birth and residential address.
2. Duty to maintain a Beneficial Ownership Register
The trustee is required to maintain a register of a trust’s beneficial owners that should contain the personal details, including name, date of birth, nationality and residential address, of each beneficial owner. The natural person’s date of entry on the Register and date of cessation from the Register must also be recorded.
If a person is aggrieved by the inclusion or omission from the Register or by a delay in updating the Register, it can apply to the High Court for the Register to be rectified. The High Court may also order the trustee to pay compensation for any loss sustained due to errors with the Register.
3. Duty to keep information in Register up-to-date
There is an ongoing duty on trustees to maintain the Register, ensuring that the information held on the Register is accurate. Where a ‘relevant change’ occurs the information in the Register should be updated by the trustee as ‘soon as practicable’ after the trustee learns of the relevant change. The Regulations state that a relevant change occurs where:
A natural person ceases to be a beneficial owner of the trust, or
Any other change occurs as a result of which the particulars in the Register in relation to the natural person are incorrect or incomplete.
4. Duty to provide ‘timely access’ to the Register
On request from the Revenue Commissioners or a State competent authority, for example, the Central Bank of Ireland or the Department of Finance, the trustee must provide the requesting authority with ‘timely access’ to the Register.
It should be noted that a State competent authority may disclose information contained in a beneficial ownership register to a competent authority of another Member State.
5. Duty to retain records
The trustee must keep a record of the actions it took to identify the trust's beneficial owners. These records must be retained for at least five years after the date on which the final distribution is made under the trust. At the end of this period, the trustee must make arrangements for the records to be deleted. This is with the exception to cases where the trustee is required to retain the records by operation of law or for the purpose of court proceedings or where any person to whom the information relates consents to the retention of the records.
6. Duty to inform other designated persons
Where a trustee of a trust enters into an occasional transaction with a designated person such as, but not limited to, financial institutions, legal professionals, accountants, company service providers and property service providers, the trustee must do the following:
Inform the designated person in writing it is acting as a trustee;
Upon request, provide the designated person (without delay) with information identifying all the beneficial owners of the trust; and
If there is a change in the information provided during the course of the business relationship, the trustee must, within 14 days of learning of the change, notify the designated person of the change and date on which it occurred.
Failure to comply
Failure to comply with the obligations under the Regulations is an offence and a trustee shall be liable, on summary conviction, to a fine a class A fine (a fine not exceeding €5,000).
Future outlook: access to the Central Register of Beneficial Ownership
The Regulations are one of a number of measures transposing AMLD4 into Irish law. For Irish companies, the Companies Registration Office is expected to launch a Central Register of Beneficial Ownership (‘CRBO’) during the second quarter of 2019. Subject to the adoption of legislation implementing the CRBO, it is understood that the CRBO for companies will be available for inspection by state authorities and financial intelligence units (without restriction) and any person or organisation that can demonstrate a legitimate interest.
The legislation giving effect to the CRBO for trusts will be enacted as part of the implementation of the Fifth European Anti-Money Laundering Directive (AMLD5) in Ireland, which requires information on beneficial ownership of trusts to be submitted to a central register maintained by the State by March 2020. AMLD5 will clarify what state authority will be required to maintain a CRBO and identify what persons will be permitted access to the CRBO for trusts in Ireland.
The Regulations take effect from 29 January 2019 and do not provide any grandfathering provisions. Trustees are therefore subject to an immediate obligation to comply with the Regulations.
Trustees are advised to review the Regulations and consider how they apply to their business. Trustees should determine who will comply with the Regulations; where relevant, trustees should take action immediately to maintain records of all of beneficial owners of the trusts they are appointed to and maintain and keep up-to-date a register of beneficial owners.