Salient Implications of the 4th Anti Money Laundering Directive on Maltese Trusts and Foundations

Although the 4th Anti Money Laundering Directive (the “Directive”) has not as yet been transposed into Maltese law, (Member States have until June 2017 to do so), it would be interesting to consider the extent to which the Malta trusts and foundations would be affected by the Directive.

Malta trusts

It is interesting to note the change in the definition of ‘beneficial owner’ as introduced by the Directive. Indeed, the definition of beneficial owner in the case of trusts as currently stated in the third anti-money laundering directive provides that the beneficial owner includes, “where the beneficiaries have been determined, a natural person who controls or is the beneficiary of at least 25% of the property or where the beneficiaries have not yet been determined, the class of persons in whose main interest the legal entity or arrangement is set up or operates.” However, the Directive now provides that beneficial owner in the case of trusts and foundations means:

“(i) the settlor, (ii) the trustee(s), (iii) the protector, if any; (iv) the beneficiaries, or if to be determined, the class of persons in whose main interest the legal arrangement or entity is set up or operates and (v) any other natural person exercising ultimate control over the trust by means of direct or indirect ownership or by other means.

Therefore, the definition of beneficial interest has been widened. Although information on the parties (as set out in the Directive) is currently collected by Maltese subject persons (as required by the Prevention of Money Laundering and Funding of Terrorism Regulations), the Directive now obliges Member States to require that the identity of all the parties to trusts or foundations mentioned above can be accessed in a timely manner by competent authorities and EU Financial Intelligence Units, and where the trust or foundation generates tax consequences the information is also to be held in a central register.

Member States must ensure timely and unrestricted access to the central register by competent authorities and EU Financial Intelligence Units, without alerting the parties to the trust or foundation concerned. Member States may also allow subject persons to access the central register subject to certain conditions. Although it may be said that the impact of this measure to trusts and foundations should not be too major, certain questions nonetheless arise such as where will the register be kept or could the information available in the register be used for other purposes by the authorities.  

While the authorities in Malta are currently working on the implementation of the Directive, one must bear in mind that this is not a Regulation and therefore, the authorities would have some lee-way in the way in which they interpret and implement the Directive. However, in the context of trusts and fiduciary obligations it needs to be seen how fiduciary shareholding will be impacted by the Directive due to the fact that the Directive provides that the names of the beneficial owners of corporate entities will need to be held in a central register and Member States shall ensure that the information held in the central register is accessible in all cases to competent authorities, EU Financial Intelligence Units, subject persons subject to certain conditions and any person or organisation that can demonstrate a legitimate interest with legitimate interest not being a defined term in the Directive.

 

Nicolai Xuereb TEP, B.A., LL.M. (Lond.), LL.D.

NXlegal
nicolai@nxlegalmalta.com