STEP Hits Back Over TI Comments On Trust Regulation

by Robin Pilgrim, LawAndTax-News.com, London

03 November 2004

The Society of Trust and Estate Practitioners (STEP) has hit back at a Transparency International (TI) report, and at subsequent media coverage, which suggested that London is a haven for money launderers as a result of the UK government's failure to properly regulate those providing services to trusts.

The TI report published on Friday expressed particular concern with regard to the government's failure to regulate those who operate so-called "shell companies", arguing that:

"It seems to us unconscionable that the UK crown dependencies and overseas territories have been pushed to introduce legislation, yet the UK itself still lacks definitive plans to do so."

Transparency International highlighted two areas relating to companies that it considers are in need of radical change, namely, the continued use of directors who are themselves companies, and the use of bearer share companies. The report explained that:

"Whilst the UK does not itself generally permit bearer share companies, the international community has failed to take decisive action against such shares. The UK must push internationally for such shares to either be banned or at least immobilised."

The report further urged the UK authorities to introduce "a regulatory regime for those who perform specified services for companies or trusts (service providers)," going on to add: "This may either be achieved by utilising the existing regime for financial services, namely the FSA, or by the creation of a new regulator to specifically cover these activities. In either case, the new regime must be backed by adequate resources."

However, in a statement released on Monday, STEP suggested that although the call for improved regulation of the trust sector was welcome, the TI report's understanding of the industry is fundamentally flawed.

STEP council member, Martyn Frost explained that:

"To combat money laundering effectively, good and proportionate trust regulation must be founded on a constructive and knowledgeable understanding of the widespread part that trusts play in the economic life of this country."

"The Transparency International report barely distinguishes between companies and trusts and fails to address the importance of trusts in the UK. In fact the vast majority of UK citizens will use or take benefit from a trust in at least one of its many forms during their lives."

The Society's statement concluded by announcing that:

"STEP supports and is participating in moves towards regulation but insists that the UK will be harmed if that regulation is not based on understanding the legitimate role of the trust."

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