The Financial Action Task Force (FATF) launches a further consultation on proposed amendments to its Recommendation 25 and the associated interpretive note on the transparency and beneficial ownership of legal arrangements such as trusts. The amendments have been refined as a result of the consultation held between June and August 2022. A second consultation examines the updated FATF guidance paper on Recommendation 24 on the transparency and beneficial ownership of legal persons. The consultations close on 6 December 2022 and STEP will respond to both.
In June 2022, the Financial Action Task Force’s (FATF’s) opened a public consultation on possible amendments to its Recommendation 25, with the aim to propose any revision during its meeting in October 2022. The Recommendation focuses specifically on transparency and beneficial ownership reporting for trusts and similar legal arrangements. One of the primary points of discussion raised by the consultation paper is the question of nexus: the determination of which jurisdiction’s anti-money laundering (AML) rules should apply to a trust.
STEP points out that a trust can be administered in such a way that it has no connection with the jurisdiction whose law governs of the trust. Furthermore, 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).
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