UK government publishes consultation response on 5AMLD and trust registration rules

Thursday, 16 July 2020
The UK government has published the outcome of its technical consultation on implementation of the EU Fifth Anti-Money Laundering Directive (5AMLD) and its impact on trust registration.
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Several useful concessions have been made, in line with recommendations made by STEP, who have been consulting with Treasury regularly on the transposition of 5AMLD. In particular, offshore trustees entering into a business relationship in the UK will not have to register the trust on HMRC’s Trust Registration Service (TRS) unless there is at least one UK-resident trustee. The original regulations required registration of offshore trusts even if there were no UK trustee, which could have deterred trustees of offshore trusts outside the European Economic Area from seeking professional advice in the UK.

However, in order to correspond with changes planned under the Registration of Overseas Entities Bill, any non-UK trust that acquires land or property in the UK will be required to register on TRS. These trusts will be on the register but will not be subject to the third-party data-sharing provisions unless they are required to register under one of the other categories. Trusts that are already registered in another EU Member State will be automatically exempt from UK registration.

Furthermore, the final regulations significantly expand the categories of trust that will not need to be registered. The full list of exempt trusts include:

  • trusts imposed by statute where these do not result from the clear intention of the settlor, for example the statutory trust arising on intestacy;
  • UK-registered pension trusts;
  • charitable trusts regulated in the UK;
  • pure protection life insurance policies and those paying out on critical illness or disablement, including group policies;
  • trusts used by the UK government and other UK public authorities;
  • trusts for vulnerable beneficiaries or bereaved minors;
  • personal injury trusts;
  • save-as-you-earn schemes and share incentive plans;
  • maintenance fund trusts;
  • certain trusts incidental to commercial transactions;
  • certain trusts used as part of financial markets infrastructure;
  • authorised unit trusts;
  • co-ownership trusts, where the trustees and beneficiaries are the same persons;
  • will trusts created on death that receive assets only from the estate and trusts that receive death benefits only from a life insurance policy and are wound up within two years of death;
  • existing trusts holding assets valued at less than GBP100 unless/until further assets are added.

It appears, however, that the government has rejected suggestions that bare trusts should also be exempt from registration.

The government has set a deadline of 10 March 2022 for existing trusts to register on the TRS, or to update their records if they have already done so.

A 30-day deadline will be imposed for new trust registrations and updates, similar to the reporting deadlines imposed on companies for reporting details of their persons with significant control.

However, the government has conceded that it would not be appropriate to require trusts created by will to be registered within 30 days of the date of death as, in most cases, the administration of the estate operates over a much longer timescale: hence the exemption of will trusts.

The penalty regime proposed in the original consultation document, consisting of nudge letters and GBP100 fixed penalties, will be retained. However, following comments by some respondents that the approach is too lenient, a more stringent penalty regime may be introduced for trustees that deliberately ignore the registration requirements.

Regarding privacy, the government is adopting a 'legitimate interest' criterion for public access to the register, under which each request will be reviewed on its own merits and access given only where there is evidence of counter money laundering or terrorist financing activity. An administration fee will be charged. Beneficiary information will not be disclosed if it would lead to a disproportionate risk of fraud, kidnapping, blackmail, extortion, harassment, violence or intimidation, or where the beneficial owner is a minor or otherwise legally incapable.

Emily Deane TEP, Technical Counsel at STEP, said: ‘STEP is delighted that the government has taken a pragmatic approach to the implementation of 5AMLD, particularly on the business relationship point, which could have had an incredibly damaging effect on the use of UK professional service providers if interpreted in the same way as 4AMLD.

‘STEP has held numerous meetings with the government over the last 18 months emphasising the negative impact that a wide interpretation of the directive could have and we are pleased and relieved that our advice and evidence have been taken into consideration so comprehensively. We are also very pleased to note that the categories of trust that will not need to be reported has significantly expanded, including will trusts, a logical decision that will reduce the compliance burden.’

The regulations to implement the provisions have now been laid before parliament.

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