Trusts in the UK have long been private structures, with information on the terms, identity of beneficiaries and trust assets only available to the settlor, trustees and certain beneficiaries. But this looks like it is about to change.
On 5 July 2016, the EU Commission published proposed amendments to the Fourth Anti-Money Laundering Directive (“the AML Directive“) designed to increase the transparency of companies, trusts and other structures in the fight against tax evasion and terrorist financing. The proposals involve the establishment of central registers of beneficial owners in each member state and have risen further up the political agenda following the terrorist attacks in Paris and Brussels.
The proposed amendments require beneficial owners and controlling persons of “business-type” trusts to be listed on a central public register in each member state. “Business-type” trusts are broadly defined as those held by a person carrying on a trust management business, which points towards any trust with a corporate (or professional) trustee.
It is not proposed that non business-type trusts will be publically searchable in this way; but their details will nonetheless be on a central register available to competent authorities (such as HM Revenue and Customs) and parties with a “legitimate interest” which may include investigative journalists. The centrally stored information will be shared across member states.
These are only proposals but there does seem to be a political head of steam to get them through. Following the Brexit vote, the extent to which the UK will transpose the Directive into UK law is unclear but the UK is openly committed to increasing transparency in the field of beneficial ownership – it has led the way in relation to companies with the introduction of public registers of “people with significant control”, and issued a joint letter with the other G5 nations on establishing central registers of beneficial owners of companies, trusts and other structures – so, it is highly likely that change in the trusts sphere will come; but whether the UK absolutely follows the text of the EU Directive remains to be seen.
Change will come with some resistance. Trusts are long-established, traditional vehicles for asset preservation and wealth planning. In many cases, the rationale behind the trust and who the trust is intended to benefit is extremely personal, and making such information public could lead to anxiety and division within families; for instance where illegitimate children have been identified by name, or where children have been given unequal interests. There are also concerns over the privacy and safety of minor and vulnerable beneficiaries.
What is the correct dividing line between secrecy, seen as a bad thing, and legitimate privacy, a good thing? The European Union or the UK Government will need to decide, but what is clear is that there is a lot at stake for high net worth individuals with trust interests.
This is a summary of the article “Wedlake Bell on EU’s Proposed Trust Disclosure Rules” first published in Wealth Briefing (www.wealthbriefing.com) on 12 August 2016. Subscribers to Wealth Briefing can read the full text article here.