In April 2019, the Government held a consultation seeking views on transposing the Fifth Money Laundering Directive into national law. The consultation ended on 10 June 2019 and the response was published on 23 January 2020.
5MLD expands the scope of the TRS register by requiring trustees or agents of all UK and some non-EU resident express trusts to register those trusts with the TRS, whether or not the trust has incurred a UK tax consequence. The original consultation indicated that charitable trusts were likely to fall within the definition of an express trust and therefore would have to register.
The money laundering and terrorist financing (amendment) regulations 2019 (MLRs) come into force on 10 January 2020, but no reference was made to changes to the Trust Registration regime.
The Government is now holding a detailed technical consultation on extending the Trust Registration Service to include the draft legislation and proposals on the types of express trusts that will be required to register, data collection and sharing, and penalties. The closing date for comments is 21 February 2020.
However, the Government has now proposed that “charitable trusts are not in scope to register because the risk of these kinds of trusts being used for money laundering or terrorist financing activity is low”.
John Hemming, CTG Chairman, commented:
“This is a great outcome for charities and vindicates the responses made by CTG and other sector bodies to the original consultation that charities were low risk and should be excluded from registering with the Trust Registration Service. This is a great example of common sense prevailing particularly as the rules would otherwise have applied regardless of whether or not the trust has incurred a UK tax consequence. We are aware that very small charitable trusts, including those that are excepted from registration with the charity regulators, could have been caught, which would have been unduly onerous, given their limited resources”.
As outlined in this commentary, the proposed changes to TRS could have been very onerous for charities.