European policymakers are at loggerheads over controversial proposals to give the public access to registers of beneficial owners of trusts and shares.
In trilogue discussions on the anti-money laundering directive, the European Parliament is pushing for full transparency on beneficial ownership registers, while the European Council is opposed to public access.
Experts warn the proposals are a “mess” and could force firms to put confidential client information in the public domain.
In February, the European Parliament set out plans for the ultimate owners of companies and legal entities such as trusts to be listed in public registers.
The rules are expected to go further than plans published by the UK Government in April for a register of beneficial ownership information for companies.
This would mean information on individuals who own or control more than 25 per cent of a company’s shares or voting rights must be provided on a Companies House register. The measures are part of the small business, enterprise and employment bill currently going through parliament.
But as the EU proposals apply to trusts and not just companies, experts warn they would catch consumers in very simple arrangements such as parents putting a property into trust for their children.
The Parliament is calling for beneficiaries of 25 per cent or more of the property of a legal arrangement to be included in the register.
Parliament rapporteur Judith Sargentini has argued if trusts were left out of the legislation, they would have become a “perfect vehicle” for criminals looking to avoid tax or launder illegal money.
Cicero senior executive Alexander Kneepkens says: “Sargentini has a clear intention: for the person behind any fund or trust to be registered in her quest for more transparency and the fight against money laundering.
“The council is clearly opposing the parliament on the point of access to the registers, with several member states, including Germany, fully opposing any public access.
“There is a significant chance for a deadlock in the negotiations.”
Wealth Management Association deputy chief executive John Barrass says: “While we support the aim of preventing trusts from being used for tax evasion purposes, we have expressed concerns about the parliament’s position.
“The difficulty is that in the UK, trust law allows combinations of quite simple relationships, such as parents putting their house into trust for their children. Putting the names and addresses of such individuals in the public domain could have highly undesirable consequences.
“Our members are very concerned and uncomfortable about the risk of making public information about their clients they go to great lengths to keep private.
“Putting the information into the register and keeping it up-to-date would also create a high administrative burden for firms. It is a mess.”
Pinsent Masons senior associate Michael Ruck says: “The idea of a public register with details of those putting a house in trust for their children sounds like overkill.
“While transparency for a trust which is in reality a private equity funding vehicle is understandable, I cannot imagine it is in anyone’s interest to have contact details for those in simple trusts made public – particularly when the whole aim of the directive is to counteract fraud.”