In a bid to crackdown on tax evasion, European citizens could have their private financial affairs exposed to the public after members of the European parliament (MEPs) voted to include trusts and allow EU citizens access to beneficial ownership registers, reports International Adviser.
As a result, EU citizens could be given access to such registers without having to demonstrate a “legitimate interest” in the information, the European parliament confirmed.
Currently, access is restricted to authorities and professionals, such as journalists and lobbyists.
“Complex company structures and shelf companies make it easy for people to hide money. Through a public register for companies and trusts, the European parliament wants to shed light on these structures and thereby combat them,” said Dutch MEP Judith Sargentini.
The amendments to the anti-money laundering directive (AMLD), agreed by the Economic and Monetary Affairs and Civil Liberties committees, would plug gaps in the EU’s framework legislation against money laundering and terrorism financing.
It would also introduce stricter transparency rules to prevent tax evasion.
The amended report was passed by 89 votes to one, with four abstentions, on Tuesday.
Previously excluded on privacy grounds, the scope of the AMLD has been expanded to cover trusts and “other types of legal arrangements having a structure or functions similar to trusts”.
Following their inclusion, trusts will now have to meet the full transparency requirements of companies, including the need to identify beneficial owners, the European parliament confirmed.
It is not clear at this stage how much detail will have to be disclosed, but it will need to be meaningful to be worthwhile, a statement from Old Mutual Wealth said.
Describing the ruling as “landmark”, the insurer believes that the ruling could see fewer people using trusts, which could impact the financial affairs of tens of thousands of ordinary people in the UK.
‘No beneficial reason’
While Gordon Andrews, financial planning expert at OMW, agrees with the spirit of the ruling and the need to combat financial terrorism, he “cannot see any beneficial reason for a register to be made available to the public”.
“A far better way would be for the register to only be available to tax authorities and governments in each country within the EU. My fear is that this will penalise law abiding people who carry out their financial affairs in a sensible, legitimate way.”
Andrews believes that privacy is very important to people, “not because of money laundering or tax avoidance”, but because of complex family situations.
“People want to be able to provide for loved ones on death and through a trust arrangement they know that this will be dealt with professionally and discretely, without the emotional upset which could arise if the arrangement is made public. It could also put beneficiaries in a vulnerable position where their future inheritance is made public,” he said.
OWM believes that there could be resistance from countries who view the measure as breaching data protection and people’s right to privacy.
The timing of the UK’s departure from the EU casts doubt as to whether it will adopt the legislation once ratified.
The committees voted 92 to one, with one abstention, in favour of entering into negotiations with the European council.
Parliament, as a whole, must now give the go-ahead in the March plenary session for MEPs to start three-way talks with the EU commission and council.