UK Lawyers Angered By Trust Proposals In EU Money Laundering Directive

by Robin Pilgrim, LawAndTax-News.com, London

04 August 2004

Lawyers in the United Kingdom are up in arms about provisions contained in the third EU directive on money laundering which will require them to obtain identification from trust beneficiaries.

Under the new proposals, which bring trusts under the same legislation which governs most other areas of the financial services sector, professional advisers will be required to obtain identification from beneficiaries who are set to receive more than 10% of a trust's assets, a move likely to create significant confidentiality problems.

Speaking to the Telegraph earlier this week, an unnamed legal professional explained that:

"When these people are asked to produce identification, they will immediately be alerted to the existence of the trust. If they didn't know about it, it would be quite natural for them to ask for more details. If some children are to get more than others, for instance, this could cause serious arguments."

The lawyer went on to add that:

"They seem to be trying to get at offshore trusts, but any trusts in the UK or Ireland will be hit too. Any UK-regulated company with an offshore business in, say, the Caribbean is also governed by the same laws as anyone operating in mainland Britain."

According to the Telegraph report, the directive's treatment of trusts stems from the fact that outside of the United Kingdom and Ireland, where they are employed as straightforward estate planning vehicles, trusts are not widely used in Europe, and are often viewed as a method of hiding taxable assets from the government.

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