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Trusts: New Rules for Beneficiaries

Trust management has long been regarded by many investors and wealthy foreigners as a safe and reliable way for tax planning, capital protection, and profitable business management. However, world regulators (in particular the European Union) insist on transparency of all financial transactions, trust assets, and their founders.

Sanctions, the crisis, the situation in Ukraine, and the Fifth and Sixth EU Directives (5AMLD, 6AMLD) — all these events served as an impetus for revising the internal policy on trusts and trust relations of many states.

New rules for trusts

Today, the world has to adapt to the new rules for trusts which largely change the old order of things. As a result, foreign companies and wealthy individuals are reviewing their priorities in terms of choosing ways and countries to protect assets and optimize taxes.

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EU Directives and New Rules for Beneficiaries of Trusts

The EU is actively fighting the financing of terrorism and tax evasion. The latest EU Directives introduced a number of mandatory requirements for EU member states, which also include reporting rules for trusts and the provision of information on beneficiaries.

5AMLD (July 2018)

EU member states undertook to implement the 5th Anti-Money Laundering Directive (5AMLD) in their domestic legislation. And here are the main points that (in the opinion of regulators) should contribute to the reduction of financial fraud in Europe and in the world:

  • transparency and accessibility of the register of beneficiaries for companies registered in EU member states
  • creation of trust registers that will reflect information about the beneficiaries and their property (trust assets)
  • ban on the provision of anonymous bank cards, which limits the range of services provided by EU financial institutions
  • expanding the scope of powers for financial intelligence
  • making clarifications on the issues of High-Risk Third Countries whose residents will be checked with more care

Also, all EU countries have committed themselves to the formation of centralized registries that will record account holders and bank safes (they will include both individuals and legal entities).

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What implications does it all have? Well, be extremely careful and cautious when you choose a bank to protect capital and diversify assets. In the worst-case scenario, you will open an account that will bring more problems than benefits in the future. Rely on our experts to help you with the right choice.

6AMLD

The new rules for trusts and companies under the Sixth Directive continue the trends set in the Fifth One. 

  • The data on beneficial ownership of legal entities, including those with nominees, should be transferred to the national registers of the EU member states.
  • The data on beneficial ownership of trusts and similar structures should be publicly available and made available upon request to the competent authorities, the Financial Intelligence Unit and organizations responsible for conducting due diligence checks through the European Central Platform (under development).
  • If the data is missing or unreliable, the member states should restrict the activities of such companies and entities until the information is provided or updated.
  • The information provided on beneficial ownership should be sufficient to identify the beneficiary and include data on high-value assets, including insured yachts and aircraft.
  • 6AMLD increases the minimum prison sentence for money laundering offenses from one year to four years.
  • The standards for risk assessment and customer verification were established with regard to cryptocurrency companies and platforms.

Following the adoption of the new rules which affect the interests of the trust beneficiaries, individual EU countries and states not included in this list have made adjustments to their domestic legislation. 

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Are there any jurisdictions where you can set up really safe trusts out of easy reach of foreign courts and lenders? Yes, there are, and our experts can give you competent advice on the best choice of a destination! Contact us without delay to set up a trust according to the new rules quickly and without personal presence.

Here are some articles on Nevis (rightly considered the trust stronghold) that may be of interest to you:

Trusts in Europe and Beyond: New Rules

Other countries that have adopted new rules for trusts:

  • On 1 November 2022, the Netherlands introduced new rules for trusts and joint account funds. Their beneficiaries are required to be identified in the register of UBOs (Ultimate Beneficial Owners).
  • The UK introduced new rules for trusts that are required to register with the Trust Registration Service (TRS) and transfer data on beneficiaries/assets.
  • Canada: New rules for trusts in 2023 provide for the filing of declarations for trusts in accordance with reporting standards (Bill C-32 of December 15, 2022). The updated requirements apply to trusts whose tax year ends on or after December 31, 2023.
  • Switzerland adopted new rules for the identification of beneficiaries of trusts and foundations. As a result, you cannot set up a trust anonymously.

If you have any questions or need help with the choice of a jurisdiction or trust establishment, our experts can easily be reached by mail [email protected] or using the live chat. Keep your funds safe!

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