Fifth Money Laundering Directive and Extension of Trust Registration Service

Following the changes to the money laundering regulations in January 2020 to reflect the Fifth Money Laundering Directive, the government have published their technical consultation on the extension of the Trust Registration Service. This proposes to extend the registration requirements to most UK express trusts, whether or not they have a tax liability. It also catches non-UK trusts who enter into a business relationship with UK professionals. ICAEW responded to the consultation on 21 February 2020 and the full response can be accessed as ICAEWrep 04/20 Fifth Money Laundering Directive and Extension of Trust Registration Service.

We welcome the efforts by government to narrow the scope of express trusts that would have a registration requirement under the extended TRS. However, there are a number of additional trusts that warrant exclusion from registration, including trusts set up under wills, insurance policies that pay out otherwise than on death or critical illness, and small charities.

The money laundering and terrorist financing risks of different kinds of bare trusts needs to be considered further so that a disproportionate administrative burden is not imposed on low risk family arrangements. Additional clarity is also needed on exactly which types of employment related trusts and trusts used for joint holding of property will be exempt from registration.

We are concerned about the proposed registration requirement for all trusts who enter into a business relationship with UK obliged entities. The broader scope of registration for non-UK trusts not only seriously damages the competitiveness of the UK accountancy profession and others, it could also have a detrimental effect on correct tax compliance. Non-UK trustees may be deterred from appointing UK advisers to provide UK tax services, for fear of having beneficial ownership information publicly disclosed.

We are concerned about the loss of privacy for trust beneficiaries that will result from disclosure of data to third parties under the legitimate interest provisions. The appropriate organisations to be undertaking investigations into suspected illicit activity are the relevant law enforcement agencies, not journalists or campaigners.

While we welcome the intent to protect vulnerable beneficiaries and those at risk of harm from having their data disclosed, we have serious concerns with how such protection will be afforded in practice, and how government will be aware on a real time basis if individuals are at risk of kidnap, harassment and fraud.

SOURCE:  www.ion.icaew.com