Trustees - Do You Need to Establish a Beneficial Ownership Register?

Overview

The new obligations are set out in the European Union (Anti-Money Laundering Beneficial Ownership of Trusts) Regulations 2019 (the “Regulations”), which transpose part of the European Union’s Fourth Money Laundering Directive 2015/849 (“MLD4”) into Irish law.

Among other things, MLD4 requires trusts and corporate entities to obtain and hold beneficial ownership information and to maintain a beneficial ownership register.  The provisions in relation to corporate entities were transposed into Irish law a few years ago - see our related briefing here.  The Regulations extend the relevant MLD4 requirements to trustees.

Who is within scope?

The Regulations impose requirements on a trustee of an express trust where:

• the trustee is resident in Ireland; or
• where the trust is otherwise administered in Ireland.

In the case of a trust that is a collective investment undertaking, a reference to the trustee of a trust includes the manager or operator of the collective investment undertaking. 

Who is a beneficial owner?

For the purpose of the Regulations, “beneficial owner” means any natural person(s) who ultimately owns or controls the customer and/or the natural person(s) on whose behalf a transaction or activity is being conducted.  In the case of a trust this includes at least:

• the settlor, the trustees, the protector if any, the beneficiaries or the class of persons in whose main interest the trust is established; and
• any natural person exercising ultimate control over the trust by means of direct or indirect ownership or through other means.

What information must be recorded on the beneficial ownership register?

Under the Regulations, a trustee of a trust which is within scope must take all reasonable steps to obtain and hold adequate, accurate and current information in respect of the name, date of birth, nationality and residential address of the trust’s beneficial owners. The trustee must enter this information in a register known as an “express trust (beneficial ownership) register” (the “Register”), as well as the following information:

• the date on which the natural person was entered into the register as a beneficial owner; and
• the date on which each natural person who has ceased to be a beneficial owner of the trust ceased to be a beneficial owner.

A trustee must also maintain the Register and update it, including where a person ceases to be a beneficial owner or where there is any other change which means that the beneficial owner’s particulars are incorrect or incomplete. 

Record keeping requirements

A trustee must keep records of the actions it has taken to identify the trust’s beneficial owners and retain those records for a period of not less than 5 years after the date on which the final distribution is made under the trust.

Who can access the information on the Register?

A trustee must provide the Revenue Commissioners or any Irish competent authority with timely access to the Register, on request.   An Irish competent authority may disclose the information in a beneficial ownership register to any corresponding competent authority of another Member State.

Trustees dealing with designated persons

Where the trustee of a trust enters into an occasional transaction with a person who is a designated person for anti-money laundering purposes, or forms a business relationship with such person, the trustee must:

• inform the designated person in writing that it is acting as trustee; and
• on request from the designated person, provide the designated person with information identifying all the beneficial owners of the trust.

What are the sanctions for a breach of the Regulations?

It is a criminal offence to fail to comply with the obligations set out above, which is punishable on summary conviction by a Class A fine, which is a fine greater than €4,000 but not greater than €5,000.

Comment

The Regulations do not provide for a transitional period or for any grandfathering arrangements.  A trustee of a trust which is within scope is under an immediate obligation to comply.

The scope of the Regulations is broad.  The use of express trusts is a relatively common feature of certain commercial or financing transactions.  For example, security trusts are often used for multi-lender loan transactions.  In most cases, the information in relation to beneficial ownership will already be available to a relevant trustee or will be easily attainable by it.  However, the Regulations will require this information to be formally recorded in the Register and will oblige a trustee to maintain records in relation to the actions taken to verify beneficial ownership.

You may access the Regulations here.

Next steps - Ireland must establish a central database

Under MLD4, Member States must establish a central register or database to hold beneficial ownership information in respect of corporates and trusts (where the trust generates tax consequences), which can be accessed by competent authorities, financial intelligence units (FIUs) and obliged entities.

Ireland has not yet established such a central register or database either for trusts or for corporates.

It is worth noting that under the Fifth Money Laundering Directive 2018/843 (“MLD5”), Member States must enter the beneficial ownership information of all express trusts into the central register, and not just those trusts that generate tax consequences. They must also ensure that the specified information on the central register is accessible to persons or organisations that can demonstrate a legitimate interest as well as to certain other persons.