What has happened?
The newly introduced European Union (Anti-Money Laundering: Beneficial Ownership of Trusts) Regulations 2021 (the “2021 Regulations”), adopted on 24 April 2021, repeal and replace the previous European Union (Anti-Money Laundering: Beneficial Ownership of Trusts) Regulations 2019 (the “2019 Regulations”) and transposes parts of the Fourth Anti-Money Laundering Directive (“MLD4”) and Fifth Anti-Money Laundering Directive (“MLD5”).
The 2021 Regulations requires trustees of express trusts to file beneficial ownership information in a newly created Central Register of Beneficial Ownership of Trusts (the “CRBOT”). The Revenue Commissioners will operate the CRBOT and have established a trust register portal on Revenue’s Online Service (ROS) to facilitate registrations. Trustees ought to continue maintaining beneficial ownership registers but must now do so within a wider legislative framework.
The 2021 Regulations are supplemental to the Criminal Justice (Money Laundering and Terrorist Financing) Amendment Act 2021 which was adopted earlier in the year and which transposes most of MLD5 and exempts certain trusts (namely pension schemes, retirement funds and employee share schemes) from being subject to the 2021 Regulations.
What Trusts are the 2021 Regulations relevant to?
The 2021 Regulations apply to all express trusts (whose trustees are resident in Ireland or where the trust is otherwise administered in Ireland) established by deed or declaration in writing and any other arrangement or class of arrangements as may be prescribed but which do not include an excluded arrangement. Excluded arrangements are categorised as ICAVs, unit trusts, occupational pension schemes and ARFs. The 2021 Regulations also apply to non-EU resident trusts whose trustees (i) enter into a business relationship in Ireland; or (ii) acquire real property on behalf of the trust. What constitutes a declaration in writing is not defined. Whilst not confirmed, it would be prudent to accept any document in writing that satisfies the three certainties test for a creation of a trust to be in scope.
Estates of deceased persons in administration are within the scope of the 2021 Regulations. In the course of administrating an estate, the legal personal representatives (ie, executors or administrators) are regarded as the sole beneficial owners of that estate. This will cease upon the completion of the administration process. Trustees of estate assets will be required to be separately registered where legal title is transferred into their names. Beneficiaries of an estate in administration would not be considered to be beneficial owners for the purposes of the 2021 Regulations save where they are beneficiaries of property settled on trust.
Partnerships (both general and limited in nature) must be cognisant of their obligations where any partnership interest is held by way of a bare trust / nominee arrangement. These interests would be within the scope of the 2021 Regulations and obligations are imposed on the trustee(s) holding the underlying partnership interest.
The 2021 Regulations also extend to trusts established for (i) charitable purposes and (ii) clubs or associations who promote amateur sports. See below for more detail on whom is considered beneficial owners of such trusts.
Who is a Beneficial Owner?
The range of persons who are considered to be beneficial owners under the 2021 Regulations include: (i) the settlor(s); (ii) the trustee(s); (iii) the protector(s) (if any); (iv) the beneficiaries (ie, an individual or class of individuals in whose interest the trust is set up or operated for or who is entitled to a vested interest (defeasible or not) in possession (whether remainder or reversion) in the capital of any trust property) and any person who has “control” over the trust.
Control, as defined in the 2021 Regulations, includes the power to (i) dispose of, advance, lend, invest, pay or apply trust property, (ii) vary the terms of the trust, (iii) add or remove beneficiaries (or class of beneficiaries), (iv) add or remove trustees, and (v) direct, withhold consent or veto the powers referred to in (i) to (iv). This is a broader definition than the one originally in the 2019 Regulations being “any other natural person exercising ultimate control over the trust by means of direct or indirect ownership or by other means”.
In the context of a discretionary trust, the class of individuals who are the objects of the trust would be regarded as the beneficial owners, together with the settlor and the trustees.
For charities, the beneficial owners are considered to be the trustees, the committee or other governing body of the charitable trust and any individual who has control over the charitable trust.
Similarly, the beneficial owners of sport clubs which are operated on foot of a trust are the trustees, the committee or other governing body of the club / association and any other individual who has control over the sports club / association.
What are trustees required to do?
Trustees have a duty to keep and maintain a beneficial ownership register. Each beneficial ownership register should record certain information including (i) the name, (ii) date of birth, (iii) nationality, (iv) residential address, (v) a statement of the nature and extent of the interest held (or the nature and extent of control exercised) by each beneficial owner and (vi) their PPS number (or alternatively a passport number / national identity card number for non-residents).
Trustees must maintain the categories of beneficial ownership information referred to above on the trust’s beneficial ownership register along with information on the dates on which each beneficial owner was added to the register and the date each person ceased to be a beneficial owner of the trust.
The 2021 Regulations provide much needed clarity on the status of trusts which have legal entities as beneficial owners. Trustees need not obtain and hold the beneficial ownership information referred to above where the beneficial owner of a trust is a legal entity, provided the trustee holds certain particulars including (i) the name, (ii) address, (iii) a statement of the nature and extent of the interest held or extent of control exercised by the legal entity and (iv) any filing number assigned to the legal entity by the registrar of the relevant beneficial ownership register in Ireland (eg, the Registrar of Beneficial Ownership of Companies and Industrial and Provident Societies) or another Member State.
Where the beneficial ownership information of a legal entity is not recorded on a relevant beneficial ownership register in Ireland or another Member State, it will be necessary for trustees to record beneficial ownership information on the individuals who are the beneficial owners (by virtue of their interest in the legal entity) of a trust except for their PPS number or passport number / national identity card number (in the case of non-resident persons).
In addition, trustees have an obligation to give notice to any individual whom the trustees have reasonable cause to believe to be a beneficial owner of a trust, or who has knowledge of the identity of a beneficial owner. Such persons must provide information to the trustees for recording on the trust’s beneficial ownership register.
There is a duty to keep beneficial ownership information up-to-date on the trust’s beneficial ownership register and trustees must notify a beneficial owner if they know of changes or have reasonable cause to believe that there have been changes pertaining to their record as a beneficial owner.
Trustees must also now file the beneficial ownership information on the newly created CRBOT. Any changes made to a trust’s beneficial ownership register should be reflected by a corresponding change in the CRBOT and trustees have a follow up obligation to deliver such information to the Registrar within 14 days from the date on which trustees become aware of any changes to a trust’s beneficial ownership information.
Where the obligation to file is discharged by an officer, employee or presenter on behalf of trustees, the name, address, phone number and email of that person must be provided to the Registrar together with confirmation of the capacity in which that person is acting.
Trustees should take active steps to ensure that the information held on beneficial ownership registers is adequate, accurate and current. It is important that internal policies are developed by trustees to ensure that they have discharged their obligations pursuant to the 2021 Regulations.
There is an obligation on designated persons to notify the Registrar where an opinion is formed that there is a discrepancy between the CRBOT and the beneficial ownership information provided by a trustee.
A cross border exemption to the central filing and follow up rules is available in certain circumstances. Trustees can procure a certificate from a corresponding registrar in another Member State confirming that beneficial ownership information has been filed, and trustees will be regarded as being in compliance with their central filing obligation and follow up obligation. It is necessary for trustees to hold the certificate in Ireland and make it available for inspection.
What are beneficial owners are required to do?
Individuals who know they are beneficial owners of a relevant trust, or ought to reasonably know that they are one, must notify the trustee(s) of their status as a beneficial owner. Furthermore, they must provide details of their beneficial ownership to be added to the register. This duty extends to notifying trustees of any changes to a beneficial owner’s information for recording on the register.
What are competent authorities required to do?
An Garda Síochána, the Revenue Commissioners, competent authorities and the Criminal Assets Bureau are obliged to report to the Registrar of the CRBOT where discrepancies are identified between the CRBOT and beneficial ownership information available to the relevant authority.
Registration Deadline for CRBOT
Trustees should be aware that beneficial ownership information must be filed in the CRBOT. For pre-existing trusts, information must be filed by 23 October 2021, being six months from the commencement of the 2021 Regulations. For any trusts created after the commencement of the 2021 Regulations, beneficial ownership information must be filed within six months of creation of the trust.
To whom are the registered available?
Trustees are obliged to grant timely access to information gathered on a local register on request from any member of An Garda Síochána, the Revenue Commissioners, a competent authority or the Criminal Assets Bureau. A competent authority (as defined) includes the Central Bank of Ireland, the Minister for Justice, Equality and Law Reform and any other competent authorities prescribed by regulations made under the Criminal Justice (Money Laundering and Terrorist Financing) 2010 Act. The information provided to such Irish authorities can in turn be shared with corresponding authorities in other Member States.
The CRBOT cannot be accessed by members of the public save for those who can demonstrate that they have a “legitimate interest” and can demonstrate that “legitimate interest” by way of submission to the Registrar of the CRBOT.
Beneficial ownership information on the CRBOT may be inspected without restriction by the Garda Síochána, Financial Intelligence Units, the Revenue Commissioners and the Criminal Assets Bureau. Competent authorities who are engaged in the prevention, detection or investigation of money laundering or terrorist financing also have a right to inspect the CRBOT.
Designated persons will have certain restricted access to the CRBOT where entering into an occasional transaction with a trustee or forms a business relationship with a trustee or taking customer due diligence measures in relation to a trust.
A failure by trustees to comply with the 2021 Regulations is a criminal offence. Trustees who have failed to comply are liable to be fined up to a maximum amount of €500,000 where convicted on indictment or imprisoned for up to 12 months.
Beneficial owners who fail to notify trustees of their status or change in status are committing a criminal offence. Such persons are liable to a class A fine or imprisonment for up to 12 months.
Trustees, beneficial owners, designated persons and competent authorities should now seek professional advice about their obligations under the 2021 Regulations and, moreover, trustees should obtain information from beneficial owners of in scope trusts and file beneficial ownership information in the CRBOT before 23 October 2021 for existing trusts.
The 2021 Regulations broaden the scope of those who can be granted access to beneficial ownership information for Irish trusts and includes provision for any person who can demonstrate a “legitimate interest” to access such information. Information on the CRBOT will not be publically available to access.