The European Union (Anti-Money Laundering: Beneficial Ownership of Trusts) Regulations (the “2021 Regulations”) commenced on 24 April in Ireland. The 2021 Regulations revoke and replace the previous 2019 beneficial ownership of trust regulations. The 2021 Regulations also:
- define what is meant by an “express trust”;
- define which express trusts are out of scope;
- define what is meant by a “beneficial owner” of an express trust; and
- increase the information a trustee is required to hold regarding beneficial owners.
Under the 2021 Regulations, an express trust is one that is “established by deed or other declaration in writing” and whose trustees are resident in Ireland or which is otherwise administered in Ireland. Where the trustees are not resident in Ireland, and where the trust is not administered in the EU, the 2021 Regulations can still apply if the trustee (in their capacity as a trustee of the express trust):
- enters into a business relationship in Ireland; or
- acquires Irish real estate in the trust’s name,
for as long as that business relationship remains in place or the real estate is held by the trustee.
Express trusts that continue to fall within the scope of the 2021 Regulations include certain express trusts frequently encountered in corporate and finance transactions, such as private family trusts, security trust arrangements and declarations of trust in respect of shares.
It should be noted that occupational pension schemes, approved retirement funds and employee share schemes are outside the 2021 Regulations scope, and other types of express trust may be included or excluded from this framework at a later date by way of regulation. In addition, investment funds established as unit trusts are now also subject to the beneficial ownership framework for certain financial vehicles where the central register is managed by the Central Bank of Ireland (CBI). In light of this, unit trust funds, which were referred to in the 2019 Regulations, are no longer referred to in the 2021 Regulations.
Under the 2021 Regulations, trustees 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 within 6 months of the 2021 Regulations commencement i.e. by 24 October 2021, or within 6 months of the creation of a relevant trust.
It should be noted that under the 2021 Regulations, the meaning of ‘beneficial owner’ is much wider than just the beneficiary of the trust in question and includes:
- any individual entitled to a vested interest of any nature (present or future) in the capital of the relevant trust fund (or in the class of individuals in whose interest the trust operates);
- the settlor;
- the trustee;
- the protector; and
- any individual who has “control” over the trust.
“Control” is defined as the power to deal with the trust property, vary the terms of the trust, add or remove beneficiaries, appoint or remove trustees, or control how such powers are exercised. Control can be exercised alone, jointly, or with the consent of another person. The 2021 Regulations vary the definition of beneficial owner for certain types of trusts. For example, these include those applicable to unincorporated bodies established for amateur sports, games and clubs, for unincorporated charities and for the estates of deceased persons.
Information to be obtained for in scope trusts
The following information is required to be kept in the beneficial ownership register of trusts in relation to each beneficial owner:
- date of birth;
- residential address;
- statement of nature and extent of interest or control held; and
- the beneficial owner’s PPS number (where the beneficial owner does not have a PPS number, then a unique number is issued to them for tax administration in his state of residence or their passport number or national identity card and other relevant certification documentation relating to such official documentation will suffice).
The trustee must enter the details of the dates on which each beneficial owner was entered into the register and also the date upon which they ceased to be a beneficial owner. These details are applicable to individuals but under the 2021 Regulations, when a legal entity is a beneficiary under the trust and that entity has made its relevant beneficial ownership filings in separate central registers or in similar registers in other European member states, then the trustee will only need to obtain the specific information concerning the legal entity and the relevant filings it has already made in the applicable central register. Where the legal entity is a beneficiary and has made no such filings on its own beneficial owners in Ireland or another EU member state, 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.
Beneficial Ownership Register (“BOR”)
As previously required under the 2019 regulations, the trustee of an in-scope trust must:
- set up a beneficial ownership register; and
- enter the above information on that register (except PPS numbers or their equivalent) along with the date on which each beneficial owner’s details were entered on the register; and keep the register up to date, including entering data on when a beneficial owner ceased to be a beneficial owner.
Under the 2021 Regulations, trustees are obliged, upon request to provide An Garda Síochána, the Revenue Commissioners (“Revenue”), the Criminal Assets Bureau and any other competent authority as determined by the Criminal Justice (Money Laundering and Terrorist Financing) 2010 Act, including the Central Bank of Ireland, the Financial Services Authority etc. with timely access to the BOR. Under the 2021 Regulations, any competent authority may disclose information on the BOR to any corresponding competent authority of another requesting member state.
Where an occasional transaction is entered into with a designated person, a trustee of a relevant trust must:
- inform the designated person it is acting as a trustee;
- 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; and
- provide the designated person with the details of all the beneficial owners of the trust.
The 2021 Regulations confirm that Revenue is to appoint a Registrar of Beneficial Ownership of Trusts and may also appoint assistant registrars. The Central Register will now be established and will be maintained by the Registrar. Details of the establishment and operation of the Central Register have not yet been published, however, once operational the trustees of relevant trusts will have to make appropriate filings within the timeframes set out above.
Trustees of relevant trusts will be required to submit the following information to the Central Register:
- the name, date of birth, nationality and residential address of each beneficial owner;
- a statement of the nature and extent of interest held/ control exercised by the beneficial owner; and
- where the trust is set up for the benefit of a class of individuals rather than specific individuals, information on the class of individuals.
Where a beneficial owner is a legal entity, the beneficial ownership information of which is already held by the CRO or the CBI (or its equivalent in an EU member state), the trustee need only submit the following information:
- the entity’s name and registered address;
- a statement of the nature and extent of the interest held/control exercised by it; and
- the filing number assigned to it by the CBI, CRO or equivalent.
Access to the Central Register
Certain members of An Garda Síochána, the FIU (Financial Intelligence Unit), Revenue and the Criminal Assets Bureau have a right to inspect the Central Register. They may share the information they gather from the Central Register, on request, with counterparties in other EU member states.
Members or officers of another competent authority (such as the CBI, Minister for Justice, Property Services Regulatory Authority, Legal Services Regulatory Authority, Law Society of Ireland, General Council of the Bar of Ireland or a designated accountancy body) may also request access to the Central Register provided certain conditions are met.
A designated person entering into an occasional transaction or business relationship with the trustee of an in-scope trust or who is otherwise carrying out Customer Due Diligence (CDD) on that trust will have a right of access to more limited information in respect of the trust’s beneficial owners. Any other person who can demonstrate a legitimate interest in accessing the information on the Central Register may also request access, although it is envisaged that the bar for such access will be high and must relate to that person’s AML/CFT activities. A person may also request access if the trust holds a controlling interest in a non-EU legal entity.
Remedies and Penalties
An aggrieved person may make an application to the High Court for the BOR to be amended where:
- details are entered incorrectly or omitted from the BOR;
- unnecessary delay takes place in updating the BOR to reflect that a person has ceased to be a beneficial owner; or
- where a default is made on the BOR.
The High Court may refuse the application, or it can order that the BOR be amended or require the trustee to compensate the aggrieved person for any loss sustained.
The 2021 Regulations have increased the sanctions for non-compliance. It is a criminal offence to fail to comply with the requirements. Penalties will apply depending on the breach. Maximum penalties for non-compliance carry fines of up to €500,000 for conviction on indictment and up to 12 months imprisonment for summary conviction or conviction on indictment.
Impact of the 2021 Regulations
While trustees of many express trusts have been complying with the requirement to obtain and hold information on the trust’s beneficial owners since 2019, the 2021 Regulations have resulted in some express trusts being out of scope. Also, where trusts are in-scope, further information will need to be sought and further steps will need to be taken where information on the identity of beneficial owners is not readily available.
Trustees should consider how the 2021 Regulations apply to them and if they are obliged to keep and maintain a BOR and make the relevant filings in the Central Register by 24 October 2021 or within 6 months of the establishment of the trust.
Registration for the Central Register is available on the Revenue Commissioner’s website here.