STEP: Amended EU money laundering directive may mandate public registries of trusts

Last-minute amendments to the European Commission's draft Fourth Money Laundering Directive will be put to the vote in committee later this week.

The Commission published its draft legislative proposal for the new directive in February last year, following revised recommendations issued by the Financial Action Task Force. It included clauses forcing companies to maintain records of the identities of their beneficial owners.

However this does not go far enough for some member states or the European Parliament, who want the provisions extended to trusts and foundations. After the draft directive appeared, the French and German Finance Ministers Pierre Moscovici and Wolfgang Schauble jointly urged the European Commission to include measures to identify the ultimate beneficiaries of trusts and related legal entities.

Last December, amendments were tabled requiring member states to create public registries listing the beneficiaries of express trusts. Amendment 121 adds to the Commission's draft text the phrase ‘Member States should therefore ensure that beneficial ownership information on companies and trusts is available through public registries’. Amendment 222 requires member states to publish ‘for trusts, the identity of the settlor, trustee(s), the protector (if any), the beneficiary or class of beneficiaries, and any other natural person exercising ultimate effective control over the trust (including through a chain of control or ownership)’.

The amendments will go to a vote in parliamentary committee on Thursday (13 Feb). The bill as amended is expected to be introduced to a full plenary session of the European Parliament on 11 March.

‘The European Parliament thinks all trusts are the work of the devil designed to aid tax dodgers,' said Richard Frimston TEP, Chair of STEP's EU Committee, quoted in the Sunday Telegraph yesterday. ‘But trusts are an integral part of English law and underpin the most everyday of transactions.’ He pointed out that mere shared ownership of an English property creates an express trust.

Last November, in an open letter to EU institutions, UK Prime Minister David Cameron suggested that trusts should not be included in the Fourth Money Laundering Directive’s beneficial ownership provisions.