The EU seeks uniform criteria to report beneficial ownership of entities

Following the Panama Papers and LuxLeaks events, the European Union has adopted measures to ensure greater transparency on beneficial ownership of legal entities and legal institutions, including those governed by the law or customs of the Member States, which have a similar structure or functions to those of trusts.

The EU Members have therefore identified in their legal systems and notified to the Commission all legal institutions that share common elements with the trust, specifying if there were internal laws on the trust and/or if the legal system adhered to the Hague Convention of 1985.

The notification sent by the Member States follows the recommendations set out by the 5th Anti-Money Laundering Directive (5AMLD), which also states that trustees or persons holding an equivalent position in a similar legal institution are subject to obligations regarding the maintenance of information on beneficial ownership.

The research conducted by the European Commission has highlighted a certain ambiguity in notifications and difficulties of the various States in dealing with the different types of legal institutions. Although the 5AMLD forces Member States to establish effective, proportionate and dissuasive measures or sanctions in case of violation of the above obligations, a general difficulty has been observed in identifying uniform criteria for the choice of applicable sanctions.

The Commission’s goal is precisely to implement common criteria for the identification of legal institutions that share common elements with the trust, successively finding a system to inflict sanctions shared by all Member States. To pursue this, a dedicated working group within the Commission will probably be set up.