HM Treasury have published the responses to their consultation, “Transposition of the Fifth Money Laundering Directive” and opened a new consultation, “Fifth Money Laundering Directive and Trust Registration Service”.
The Fifth EU Anti-Money Laundering Directive (5MLD) imposes new duties on accountants to check beneficial ownership of client companies and trusts when providing tax advice and to report discrepancies at Companies House. It came into force on 10 January 2020 with the exception of where it applies to the Trust Registration Service (TRS). The application of the rules has been delayed pending the outcome of the recently opened Trust Registration Service consultation.
An earlier consultation in 2019 focused on how 5MLD would extend the scope of the money laundering rules in terms of the types of businesses affected, how to deal with electronic money, beneficial ownership information and registers, as well as the TRS. The overriding view from the responses received was support for all the extensions to its scope, but there were concerns over how the rules would affect and extend requirements under the TRS.
As a result, and as expected, the new consultation relates solely to the TRS. It explains that the new directive will require all UK trusts and some non-EU resident express trusts to be registered, with the exception of the following. Further consideration will be given as to how to best deal with bare trusts.
- Statutory trusts such as on intestacy.
- Where two or more people co-own an asset (e.g. a bank account) legally and beneficially for themselves and at the same time.
- Trusts used solely to hold insurance policies, vulnerable beneficiary and personal injury trusts, and charitable trusts.
- Registered pension schemes held in trust.
- Trusts already registered in an EU member state.
Proposals
In the consultation, the government proposes that under the new rules:
- Trusts existing as at 10 March 2020 must register by 10 March 2022.
- Trusts set up after 10 March 2020 must register within 30 days or by 10 March 2022, whichever is the later.
- Trusts set up on or after 10 March 2022 will have 30 days to register.
- Trustees to have 30 days from when they become aware of changes to update the register.
- No financial penalties for:
- failure to register and a first offence of failing to update details within the time limit but a notification letter would be sent to the trustees.
- A fixed penalty of £100 per offence for second and each subsequent offence of failing to update details within the time limit.
- Trustees found to have deliberately failed to register or to update details on time, other than due to a genuine mistake through lack of awareness, may be subject to a financial penalty in the first instance rather than a notification.
- There will be an appeals process for penalties issued. Trustees can follow this if they consider they have a reasonable excuse for not complying.
- There will be three ways in which TRS data can be shared, for a fee, with exemptions where to grant access to information would create a disproportionate risk to the beneficial owner:
- An application process for ‘legitimate interest’ and ‘third country entity’ requests.
- A mechanism for ‘obliged entities’ (those entering into a business relationship with the trust) to receive the required extracts from the register, managed by trustees through TRS.
- Existing and continuing arrangements for law enforcement agencies.
Consultation questions:
Q1: Are there other express trusts that should be out of scope? Please provide examples and evidence of why they meet the criteria of being low risk for money laundering and terrorist financing purposes or supervised elsewhere.
Q2: Do the proposed definitions and descriptions give enough clarity on those trusts not required to register? What additional areas would you expect to see covered in guidance?
Q3: Do the proposed registration deadlines and penalty regimes have any unintended consequences that would lead to unfair outcomes for specific groups?
Q4: Do you consider that the revised definitions and application process for legitimate interest and third-country entity requests, set the right boundaries for access to the register? If not, please provide specific examples of where you would consider this not to be the case.
Q5: Does the proposed handling of exemptions for legitimate interest and third-country entity requests provide the right access to the beneficial ownership data whilst protecting beneficial owners from the potential risk of harm?
Q6: Are there any instances where the above proposals would not give investigators access to the information they require to follow a specific lead in suspected money laundering or terrorist financing? Please be specific and provide examples.
The consultation closes on 21 February 2020. Comments may be sent by email to:
Links to our useful guides:
UK Trusts (subscriber)
Non-resident trusts (subscriber)
Fifth EU Anti-Money Laundering Directive checklist
External links:
Technical consultation document: Fifth Money Laundering Directive and Trust Registration Service”.
The transposition of the Fifth Money Laundering Directive: consultation responses