Date posted: Tuesday, February 18, 2014

European Union States are keen to combat tax evasion and money laundering. As part of this drive, there is a desire to strengthen rules that enhance the transparency of company ownership. The reason is that Governments believe that lack of knowledge about who ultimately owns and controls companies facilitates illicit domestic and cross-border money laundering, corruption, tax evasion and other crimes. This strengthening in information gathering can be achieved through the Fourth Money Laundering Directive (MLD) in order to ensure that companies hold adequate, accurate and current information on who their beneficial owners (i.e. shareholders) really are.

Specifically, the UK Government committed in the summer of last year to hold company beneficial ownership information on a central registry and to consult on whether this information should be generally available to the public. Later in the summer, the Government confirmed that this register would be open to the public in order to prevent the misuse of companies for illicit purposes.

The UK Government has encouraged other jurisdictions to similarly extend their disclosure regimes to enable law enforcement and tax authorities to be able to access critical information for cross-border investigations.

The UK has acknowledged that whilst it is good to clamp down on companies, it is important not to ignore other areas where illicit activity may be taking place. In this respect more and more information is being obtained on trusts – especially offshore trusts by virtue of the automatic tax information agreements being concluded by the UK and other EU countries. However the UK believe it is necessary to exercise caution on extending the ‘company disclosure approach’ to trusts (and other legal arrangements).

The problem is that many of the EU jurisdictions do not treat trusts in the same way that the UK and some of the designated territories do. Because of this the European Parliament feel that trusts should be subject to the same disclosure rules which are discussed above and applicable to companies and as a result have widened the provisions in the Bill to cover trusts. If enacted, this would mean that the financial details of trusts would be made available to the public. There would also obviously be a financial implication in making this disclosure.

The draft Bill was voted upon last week (13th Feb) so the outcome is yet to be seen, and if approved, would become part of the European Commission’s anti money-laundering directive which all EU members would have to implement. If implemented, this Regulation would have serious implications in a number of well known and not so well known areas. As well as trusts of life assurance policies, pensions and investments, trusts used under wills, in joint ownership cases and divorces could all be affected.


If trusts are included in the new Money Laundering Directive and treated in a similar way to companies, this could have serious implications for many of the trusts in common use – including those used in financial services. The progress of this Bill will be followed with interest.

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