This article explores latest developments in Europe concerning the fight against money laundering. While focused on Europe, the issues at stake are, by their very nature, global in scope so we hope readers from all regions find this item of value. The article goes into one of the greatest controversies around the constant demand for transparency: what is the proper boundary between legitimate privacy and secrecy? Attacks on offshore jurisdictions such as Switzerland have brought this to the fore, and calls for public registers of beneficial ownership of companies, trusts and other structures have raised concerns about privacy and the wellbeing of beneficial owners.
On 5 July 2016, the European Commission published proposed amendments to the European Union's 4th Anti-Money Laundering Directive, or 4AMLD. The proposal indicates that the amendments are born out of concerns arising from the recent increased terrorist threats to European states and so seek to strengthen the fight against terrorist financing. By consequence, the proposals increase transparency. Some proposals will affect companies and other legal entities, such as foundations, but the fundamental proposals will affect trusts and the requirement to make public beneficial ownership information in relation to trusts.
Trusts, other legal arrangements
In June 2015, article 31 of 4AMLD proposed that, where a trust generates tax consequences (undefined), a member state must have in place a register containing the beneficial ownership information which is open to competent authorities (e.g. branches of governments and intelligence units) and obliged entities (i.e. banks and professionals). Public access for individuals or organisations displaying a legitimate interest (undefined but presumably in the context of money laundering, terrorist financing and associated crimes such as fraud, corruption and tax evasion) was not a requirement unlike for legal entities (i.e. companies or foundations). Therefore, public access to trust information was restricted.
However, the recent proposals increase transparency on trusts' beneficial ownership information and amend article 31 of 4AMLD to:
(i) seemingly remove the requirement for a trust to generate tax consequences before registration is required; and
(ii) introduce provisions that beneficial ownership information may be accessed by any person or organisation who can demonstrate a legitimate interest.
The legitimate interest requirement is...