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UK begins consultation on EU 5AMLD

Thursday, 18 April, 2019

HM Treasury has begun consulting on the transposition of the EU Fifth Anti-Money Laundering Directive (5AMLD), which, among other measures, will allow public access to the central register of trust beneficial ownership if the applicant can show 'legitimate interest'.

5AMLD came into force in June 2018, requiring Member States to implement it in national law by 20 January 2020 for most of its provisions. Although the UK has committed to leaving the EU, it still intends to implement the directive by the given deadline, even though several other EU Member States have not even implemented the Fourth Anti-Money Laundering Directive yet, let alone the Fifth. HM Treasury's consultation document does, however, promise not to 'gold-plate' the provisions in 5AMLD, except where there is good evidence that a material money laundering risk exists that must be addressed.

As well as public access to the trust register, 5AMLD will also require that the register includes all UK express trusts, not just those with UK tax consequences. It will also bring into scope non-EU resident trusts which own UK land or property, or which have a business relationship with an obliged entity in the UK, such as a bank, accountant, or solicitors. This will extend the number of registrable trusts from around 200,000 to as many as two million, many of which may be trusts set up to protect minors or other vulnerable people for whom there are good reasons to protect their identities from public gaze.

'It is important that any definition of legitimate interest protects those persons whose data is held on TRS from purely speculative queries, and from requests made for any inappropriate reason', says the consultation document.

Its chosen approach is to link 'legitimate interest' to 5AMLD's original purpose of combatting money laundering. Those with 'legitimate interest' will thus be limited to people with active involvement in anti-money laundering or counter-terrorist financing activity, and those who have reason to believe that a particular trust or person is involved with money laundering or terrorist financing. Such a belief must be shown to be underpinned by evidence, and speculative enquiries into all or multiple trusts on TRS will not be deemed legitimate, says the Treasury.

The government itself will decide whether or not requests for trust data meet the definition of legitimate interest. To determine this, it will wish to see the requestor's identification documents, and evidence linking the trust or person about whom the request is being made to money laundering or financing terrorism. It will also make a charge for the information, with fees 'proportionate to the costs involved'. There may also be a detailed internal assessment process, and potentially a right of appeal.

Moreover, personal data on vulnerable individuals associated with any trust that is the subject of such a request will receive 'special consideration'. In particular, the Treasury expects that information on any minors associated with a trust will be withheld, even if other data relating to that trust is released.

Deadlines for registering trusts are also to be changed. The current Trust Registration Service (TRS) registration deadline (31 January for all trusts) was based on the link to submitting a tax return, but 5AMLD has now broken that link. So, for unregistered trusts already in existence on 10 March 2020, the government is proposing a registration deadline of 31 March 2021. This gives a long lead-in time given the greater number of trusts that will need to be registered.

For trusts created on or after 1 April 2020, the government proposes that the trust should be registered within 30 days of its creation. Thus there will no longer be a single deadline for all trusts each year. This 30 day deadline will also be used for any amendments to be made to the TRS data in due course, once the facility to do so is available.

STEP will be submitting a response to the consultation, which closes on 10 June 2019. A further consultation on the draft regulations is expected in summer 2019.

Sources