As published on step.org/industry-news, Thursday 4 August, 2022.
Consultation has closed on the Financial Action Task Force's (FATF’s) call for evidence on possible amendments to its Recommendation 25 regarding transparency and beneficial ownership for legal arrangements such as trusts.
When the public consultation opened in June 2022, FATF stressed that it had not yet decided on any draft amendments and would propose revisions to the existing text for discussions at its October 2022 meetings. One of the key discussion points in the consultation paper is the question of nexus: the determination of which jurisdiction's anti-money laundering (AML) rules should apply to a trust.
In its response to FATF, STEP points out that a trust may quite properly be administered in such a way that it has no connection with the jurisdiction whose law governs of the trust. Moreover, some trusts do not have an express statement of their governing law, which must be determined by examining the facts of the case, such as the location of the trustees. Trusts can therefore often be moved from one jurisdiction to another by removing a trustee in the first jurisdiction and appointing a trustee in the second, who will then take over the responsibility for tax or reporting obligations in that jurisdiction.
STEP is suggesting that the jurisdiction of the governing law of the trust should not be treated as relevant for the purposes of determining what jurisdiction's AML rules should apply to the trust. Instead, the laws of the jurisdictions where a trustee is resident or where the trust administration is carried out should be used.
STEP also suggests that company registers should have to identify only directors and individuals holding 25 per cent or more of the shares or voting rights of a company, as is required for the trust register under the UK’s Trust Registration Service (TRS).
'STEP supports FATF's work to prevent the misuse of legal arrangements for money laundering or terrorist financing', the Society said, adding that it ‘would also call for more specific guidance on what information is required to be obtained, verified and included in relation to beneficiaries.’