Beneficial Ownership of Trusts: New Regulations have Commenced

The European Union (Anti-Money Laundering: Beneficial Ownership of Trusts) Regulations (the ‘2021 Trust Regulations’) recently commenced in Ireland. They revoke and replace the 2019 beneficial ownership of trust regulations, which we wrote about previously here.

The 2021 Trust Regulations clarify the types of express trusts which are caught by the legislation, which require trustees to:

• Obtain and hold accurate and current information in respect of the relevant trust’s beneficial owners, and

• File certain relevant information in a central register in line with the EU 4^th Anti-Money Laundering Directive (as amended by the EU 5^th Anti Money Laundering Directive) (“4AMLD (as amended)”)

Due to the broad scope of the 2021 Trust Regulations, it is important to consider if your business is impacted. In this article, we give a summary overview of the 2021 Trust Regulations. We recommend that you seek legal advice if trusts are used by you personally or in your business in order to determine if the 2021 Trust Regulations are applicable. The obligations under the 2021 Trust Regulations apply to:

• Trustees

• Beneficial owners of a trust

• Designated persons, and

• Competent authorities such as An Garda Síochána, the Revenue Commissioners, the Criminal Assets Bureau.

Scope of the 2021 Trust Regulations

The application of the 2021 Trust Regulations may vary depending on certain facts relating to the operation and type of trust concerned. We explore some of the considerations relating to the trust which need to be considered.

Is the trust considered to be a ‘relevant trust’ for the purpose of the regulations?

In considering the application of the 2021 Trust Regulations, it is necessary to consider section 26 of the Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Act 2021. This section clarifies the express trusts in scope under the 2021 Trust Regulations.

It provides that a ‘relevant trust’ means an express trust established by:

• A deed, or

• Other declaration in writing, and

• Any other arrangement or class of arrangements as may be prescribed by the Minister for Finance in the future,

but does not include an excluded arrangement

In addition, the 2021 Trust Regulations will be applicable to any ‘relevant trust’:

• Whose trustees are resident in the State, or

• Which is otherwise administered in the State.

Where the trustees are not resident in the EU and the trust is not otherwise administered in the EU, the 2021 Trust Regulations are applicable to a trustee of a relevant trust, that:

• Enters a business relationship in the State, or

• Acquires land or other real property in the State in the name of the trust.

Is the trust out of scope and considered an ‘excluded arrangement’?

The trusts arrangements that are excluded from being a ‘relevant trust’ include:

• Certain approved occupational pension schemes and approved retirement funds

• Certain revenue approved profit share scheme or employee share ownership trust

• A trust for certain restricted shares

• A certain Haemophilia HIV Trust

• Any unit trust which is already required to file certain beneficial ownership information in a central register, and

• Any other arrangement prescribed by the Minister of Finance in the future

What does ‘beneficial owner’ mean?

It is important to understand what ‘beneficial owner’ means in the context of a relevant trust to which the 2021 Trust Regulations apply. This is because the trustees of a relevant trust are obliged to take reasonable steps to obtain and hold adequate, accurate and current information on the relevant trust’s beneficial owners. The trustees are also required to file that information in the central register within six months of the commencement of the 2021 Trust Regulations, ie by 24 October 2021, or within six months of the creation of a relevant trust.

For the purpose of the 2021 Trust Regulations, the meaning of the term ‘beneficial owner’ is much wider than just the beneficiary of the trust in question and includes:

• Any individual who is entitled to a vested interest in possession, remainder or reversion, whether or not the interest is defeasible in the capital of the relevant trust property

• In the case of a relevant trust other than one that is set up or operates entirely for the benefit of individuals referred to in subparagraph (a), the class of individuals in whose interest the trust is set up or operates

• Any individual who has control over the relevant trust

• The settlor (who need not be an individual)

• The trustee (who need not be an individual)

• The protector (who need not be an individual)

The 2021 Trust Regulations explain what ‘control’ means under the definition of ‘beneficial owner’.

The 2021 Trust Regulations vary the above definition of ‘beneficial owner’ for certain specified types of trusts. For instance, these include those applicable to unincorporated bodies established for the amateur sports, games and clubs, for unincorporated charities and for the estates of deceased persons.

If a relevant trust is in scope, what information needs to be obtained?

The following information is required to be kept in the beneficial ownership register of trusts (the BOR) in relation to each beneficial owner:

• Name

• Date of birth

• Nationality

• Residential address

• The statement of the nature and extent of the interest/control held

• The beneficial owner’s PPS number. If the beneficial owner does not have a PPS number, then a unique number issued to him/her for tax administration in his state of residence or his or her passport number or national identity card and other relevant verification documentation relating to such official documentation (the ‘Official Foreign Reference Number’) will suffice

The trustee must also insert details of the dates on which each beneficial owner was entered into the register and on which date they ceased to be a beneficial owner.

Those details are applicable to individuals, but not to any beneficial owner who is a legal entity. The 2021 Trust Regulations provide that, when a legal entity is a ‘beneficiary’ under the trust and the entity has made its relevant beneficial ownership filings in separate central registers or in similar central registers in other Member States, then the trustee will only need to obtain specific information concerning the legal entity and the relevant filings it has already made in the applicable central register.

However, if a legal entity is a beneficiary of a trust and no such filings on its own ‘beneficial owners’ have been made in any central register in either Ireland or another member state (for example, for any legal entities incorporated outside of the EU), then the trustee will need to obtain all the relevant information for the register on any individuals, constituted through that legal entity, as beneficial owners of the trust.

There are certain notice obligations applicable to trustees and beneficial owners concerning the information required for the BOR in certain circumstances.

Further obligations relating to access to the BOR and information on the identity of the beneficial owners

Under the 2021 Trust Regulations, trustees are obliged, on request, to provide An Garda Síochána, the Revenue Commissioners, the Criminal Assets Bureau and any other “competent authority” (as determined under the Criminal Justice (Money Laundering and Terrorist Financing) 2010 Act and, for example, includes the Central Bank, the Financial Services Authority, etc.) with timely access to the BOR.

The 2021 Trust Regulations permit competent authorities to disclose any information on the BOR to any corresponding competent authority of another requesting Member State.

If a trustee of a relevant trust enters into an occasional transaction with a designated person or forms a business relationship with a designated person then the trustee must:

• Inform the designated person it is acting as trustee

• Provide them with the details of all the beneficial owners of the trust

• Notify of any changes to the beneficial owners of the trust within 14 days from the date on which the trustee became aware of any change

A designated person for this purpose is an organisation which is required to carry out anti-money laundering due diligence on its customers or clients. Relevant clients might include credit institutions, banks, accountants, solicitors, etc. An occasional transaction is a transaction for which a designated person must apply customer due diligence.

Central Register

The 2021 Trust Regulations provide for the establishment of a Central Register of Beneficial Ownership of Trusts. When the central register is established, the trustees of relevant trusts will have to make appropriate filings within the timeframe set out above. The central register will be maintained by the Revenue Commissioners.

The trustees of relevant trusts will be required to submit the following details about the trust’s beneficial owners: name, residential address, nationality, date of birth, PPS number (if one has been issued to the beneficial owner in question) and the nature and extent of ownership or control or, in relevant circumstances the class of individuals in whose interest the trust is set up or operates to the Registrar or in the case of where a legal entity is a beneficiary of the trust and the legal entity has already made filings in a relevant central register, the required information concerning filings already made by the legal entity in other central registers.

Access to the central register

Certain parties are entitled to have access to the information on the central register and the 2021 Trust Regulations make provision for what information they are entitled to access.

Remedies and sanctions

If scenarios where:

• Details are entered incorrectly in or omitted from the BOR, or

• A default is made on the BOR, or

• Unnecessary delay takes place in updating the BOR to reflect that a person has ceased to be a beneficial owner,

an aggrieved person or any other interested person can apply to the High Court for the BOR to be amended. The High Court may refuse the application or it can order for the BOR to be amended or require the trustee to compensate the aggrieved person for any loss sustained.

The 2021 Trust Regulations confirm that “any other interested party” means any other person who is a beneficial owner of the relevant trust.

The sanctions for non-compliance have increased under the 2021 Trust Regulations. It is a criminal offence to fail to comply with the obligations. Varying penalties may apply depending on the breach. Maximum penalties for non-compliance carry fines not exceeding €500,000 for conviction on indictment and up to 12 months imprisonment for summary conviction or conviction on indictment.

Impact of the 2021 Trust Regulations

The 2021 Trust Regulations are far reaching in terms of the trusts caught within the ambit of the legislation. Unfortunately there is no di minimis applicable in respect of the interest of the beneficial owners in the relevant trust and the legislation also requires details of the trustees to be filed.

When we understand more about the central register and how filings will be made, we will publish further guidance.

Trustees should consider how the 2021 Trust Regulations apply and identify if they are obliged to keep and maintain a BOR and to make the relevant filings in the central register by 24 October 2021 or within 6 months of the establishment of the trust.

For more information on this development, contact a member of our Governance and Compliance team or your usual MHC contact.