MLRs and TRS – Room for Improvements?
It seems barely a month goes by without a development in the world of anti-money laundering rules and regulations. The latest instalment comes in the form of a new consultation on proposals to amend the AML regime, counter-terrorist financing and the Trust Registration Service (TRS) – which was introduced back in 2017 in a drive to improve corporate transparency.
The TRS requires most types of UK trust to register with HM Revenue & Customs, including all UK express trusts (even if non-taxable), discretionary trusts and declarations of trust of co-owned property (if the trustees and beneficiaries are not identical). Certain non-UK non-taxable trusts that acquire land or property in the UK must also register.
The Treasury consultation, Improving the effectiveness of the Money Laundering Regulations, - open until 9 June - is seeking views on a range of topics including:
Money Laundering
Customer due diligence – Making due diligence checks more proportionate and effective and considering simplified and enhanced customer due diligence.
For instance, are ‘triggers’ for due diligence (regulation 27 MLRs) sufficiently appropriate and clear, particularly for non-financial regulated firms? Is further clarity needed on when ‘source of funds’ checks should be carried out? and are the requirements to verify anyone ‘acting on behalf of’ a customer clear enough?
Digital identity verification – What information, for instance, could be included in any guidance that may be issued?
High-risk third countries – Come regulated firms find complying with the requirements expensive and burdensome. Views are sought on relaxing or removing the checks required; and issues of proportionality around the current requirements.
Shelf companies – The government wants to extend TCSP (trust or company service provider) activity under the MLRs to include the sale of off the shelf companies – what it calls “a longstanding gap in the current regime with evidence of abuse”. Views are sought on this.
The Trust Registration Service
Both the operation and scope of the TRS are under review to see what improvements can be made. Government is proposing, and seeking views on:
• requiring the registration of all non-UK express trusts with no UK trustees, that own UK land and making them subject to the current Trust Data Sharing process
• aligning the registration requirements of some trusts required to register following the death of a settlor
· small, low value trusts could be made exempt from registration, in specific circumstances The consultation can be found here
Separately, a consultation (which closed in February) detailed proposals to improve transparency of land ownership involving trusts. Proposals included widening access to trust information held on the Register of Overseas Entities; and how ownership of land involving trusts can be made more transparent.
If you would like us to cover an issue in the next NGM Tax Law Newsletter, we would be pleased to hear from you