Every company secretary is undoubtedly familiar with the requirement to make beneficial ownership filings to the Central Register of Beneficial Ownership (RBO). This requirement, imposed by the Fourth EU Anti-Money Laundering Directive (AMLD4) as amended by the Fifth Anti-Money Laundering Directive (AMLD5), applies to companies and industrial and provident societies.
What may be less familiar however, are the European Union (Anti-Money Laundering: Beneficial Ownership of Trusts) Regulations 2019 (S.I. No. 16 of 2019) (2019 Regulations), which impose a similar duty for trusts as is imposed for companies:
A trustee of a trust shall take all reasonable steps to obtain and hold adequate, accurate and current information in respect of the trust’s beneficial owners.
AMLD5 placed an obligation on Member States to create a publicly available central register of beneficial ownership for express trusts whose trustees are resident in Ireland, or which are otherwise administered in Ireland. The establishment of a central register for trusts builds on the obligations imposed on trustees under AMLD4. The Department of Finance is currently drafting the statutory instrument to establish this central register. It is understood that the Revenue Commissioners are likely to be the authority with responsibility for this register.
Express trusts feature commonly in business, such as declarations of trust in respect of shares, security trusts in multi-lender finance transactions, trust-based pension schemes, or even employee share schemes.
As one of just three common law countries in the EU, Ireland has a particularly 'trust-heavy' jurisdiction; the use of trust structures in Ireland is commonplace and not always equivalent to civil law jurisdictions in the EU. This makes the establishment of a central register uniquely onerous. While beneficial ownership information may be readily available in many cases, the situation may be less clear when dealing with more unusual scenarios such as charitable or pension trusts. Maintaining adequate information in these instances is likely to cause difficulties that did not arise for the original RBO. GDPR may also be a relevant factor if the legal basis for publishing information on the beneficial owners of trusts in a central register is uncertain, which remains the case for pension trusts.
It is likely that these issues and related industry concerns, coupled with obvious logistical problems arising from COVID-19 has stalled legislative progress, and the original deadline of 10 March 2020 for implementation has passed. At the time of writing, there is no indication as to when the necessary statutory instrument to establish the central register for trusts will be published.
The 2019 Regulations also apply to collective investment schemes that are constituted as trusts. Of specific note are unit trust schemes registered under the Unit Trust Act, 1990.
Significantly, on 6 March 2020 the Central Bank of Ireland (CBI) confirmed it will be responsible for establishing a central beneficial ownership register for Irish collective asset-management vehicles (ICAVs) and unit trusts. In this announcement, the CBI expressed the intention that a statutory instrument to establish this register would be published by the end of March. However, like the situation for the central register for trusts other than trusts that are investment funds, no further information on the status of this secondary legislation is available yet.
Ireland's tardiness in fully complying with AMLD5 has not gone unnoticed. On 14 May 2020, the European Commission sent a letter of formal notice to Ireland (along with eight other Member States) for having only partially transposed the Directive.
Ireland has four months following this letter to issue a "satisfactory response", in the absence of which the Commission may decide to send a Reasoned Opinion. This would in theory form the basis of any resulting infringement case that the Commission may take going forward.
Despite Commission notice, a combination of ongoing industry concerns, a delay in government formation and an unprecedented pandemic means the formation of the central registers for trusts is not likely to be a legislative priority for the new government. It may be that progress will come later rather than sooner.
In the meantime, and despite such delays, practitioners are advised to begin ensuring that internally held beneficial ownership information for trusts is up to date in anticipation of the establishment of the new central registers. While trustees are already required to hold adequate information on their beneficial owners, the establishment of central registers will create significantly more onerous obligations for trustees.
Deirdre Mooney is Head of Company Secretarial at William Fry and a member of the Practice Committee of the Irish Region of the Chartered Governance Institute.