To infinity and beyond – anti-money laundering hits new heights
Whilst trustees of occupational pension plans are still grappling with the implications of the EU’s fourth money laundering directive, they will be horrified to hear that the fifth money laundering directive is already on its way! The fourth money laundering directive was implemented in the UK on 26 June last year and was the first one that has applied to occupational pension plans. Trustees (and many pension lawyers!) are still assessing the impact in terms of additional record keeping and whether or not to register on HMRC’s Trust Registration Service. In respect of the latter, certain types of investment structures, such as investments made through partnership arrangements, might have resulted in a tax liability rendering a pension plan a “taxable relevant trust”. This is against the backdrop of HMRC not expecting that any occupational pension plans would need to register on the Trust Registration Service.
The story does not end there, however. The European Parliament was not satisfied that the fourth money laundering directive went far enough in terms of transparency of trust ownership. With the European Commission’s proposal to extend the fourth money laundering directive suggested in July 2016, the European Parliament took the opportunity to push for the same transparency for trusts as is currently in place in respect of corporate entities.
The amendments contained in the fifth money laundering directive will bring in the following changes in relation to express trusts (the definition of which still captures occupational pension plans set up under trust):
- The general public will be able to access beneficial ownership information on the Trust Registration Service (or equivalent) if they can show a legitimate interest. As the access requirements are supposed to reflect the public access requirements that exist in relation to beneficial ownership information of corporate bodies, it is possible that provided an applicant provides online registration details, the information will be freely available to access. Particular emphasis is placed on allowing investigative journalists access to beneficial ownership information.
- The information that will be publicly available will include the name, birth month and year, country of residence and nationality of the beneficial owner and nature and extent of beneficial ownership.
- If access to the information would pose a disproportionate risk to the beneficial owner such as a risk of fraud, kidnap, violence or the beneficial owner is a minor or otherwise incapable then an exemption to disclosure may be sought on a case by case basis.
- The definition of beneficial owner remains the same as under the existing directive, save that the current requirements capture any individual with “effective” control of a trust whereas the fifth money laundering directive would capture any individual with “ultimate” control of a trust. This might exclude the need to obtain the personal data of a scheme actuary, but the overall definition would still capture pension plan trustees.
- There will be a new requirement for the central register of beneficial owners in each member state to be linked up by a European Central Platform. Once information appears on the national register, beneficial ownership information must remain on the register for between 5 and 10 years after other records have been deleted.
- On the plus side (although this is really more of a negative), trustees will no longer need to work out whether their plan has paid any of the trigger taxes in the preceding tax year, which would necessitate registration on the Trust Registration Service, because trustees of all express trusts will have to register on the new register, regardless of tax status.
- There is no exemption in the fifth money laundering directive in relation to occupational pension plans. It remains to be seen whether HMRC and the Treasury decide that enough is enough and that it is not proportionate to require public access to the personal details of pension plan trustees, given the low risk of money laundering presented by an occupational pension plan.
The text of the fifth money laundering directive is in the process of being translated into all official languages by judicial linguists to ensure legal consistency. Upon the end of this process, the Council of the EU and European Parliament need to approve the agreed text and subsequently submit it for a publication in the Official Journal of the EU. The directive will need to be transposed into national law 18 months after the entry into force with the new beneficial ownership register being in place within a further 2 months.
How this all fits with the Brexit transitional period and the protection of personal data under the General Data Protection Regulation remains to be seen.