In a bid to combat the threat of financial crime and money laundering throughout EU member states, new rules will soon come into force that will affect Trusts and their Trustees.
Despite Britain’s exit from the EU still largely undecided, the Treasury has announced its commitment to rolling out the Fifth Anti-Money Laundering Directive (5MLD) within the UK from 10 January 2020.
The extended changes were developed following the 2015 terrorist attacks in Paris, and work to bolster transparency in European financial systems and improve existing frameworks to tackle terrorist financing and money laundering.
Some of the key changes include:
- Regulation of virtual currencies and pre-paid cards
- Greater transparency around beneficial ownership and Trusts
- Safeguarding improvements to cover transactions both to and from high risk countries
- Creating a more accessible centralised national bank, payment account register and central data retrieval system to all member states
Most Trusts with a UK tax liability will have already been registered following the introduction of the ‘Trust Registration Service’ under the Fourth Directive, however the Fifth Directive now goes a step further by bringing into its scope all UK Express Trusts, not just those with a UK tax liability. An ‘Express Trust’ is that which was deliberately created by a settlor, as opposed to a Trust that was established through a court order.
The Government has proposed that any unregistered Trusts that are in existence come 10 March 2020 will have until 31 March 2021 to register. It has also proposed that all new Trusts created on or after 1 April 2020 will need to register within 30 days of their creation.
Many Trustees that we support are initially unaware of their registration status, particularly when no tax liabilities have previously arisen. It’s crucial that all affected clients speak with their advisor to discuss their responsibilities under the Fifth Directive, as the onus is on Trustees to comply with these new provisions.
HMRC is currently reviewing the data and evidence gathered during its consultation on the Fifth Directive and as always, we will continue to keep our clients up to date with the latest changes as and when they are announced.