5MLD – Will centralised company and trust registers arrive in the Crown Dependencies ahead of the Overseas Territories?
4MLD has since morphed into 5MLD, with the scope of access to company beneficial ownership registers entirely recast. Unequivocally, there will now be full public access. Whereas 4MLD anticipated that only trusts which “generate tax consequences” would need to be registered, 5MLD removes that limitation. 5MLD has not gone so far as to require public access to trust registers, but it does require public access if a trust holds a controlling interest in a company that is not EU incorporated. That potentially undermines the concession.
Introduction of centralised company and trust beneficial ownership registers
In a previous article, we analysed the EU’s drive over the last few years to introduce centralised company and trust beneficial ownership registers.
We identified that the relevant EU legislation (the 4th Anti- Money Laundering Directive – “4MLD”), in its guise at the time, would require those registers to be accessible to competent authorities, law enforcement and “obliged entities” (e.g. banks for CDD purposes), as well as persons able to demonstrate “a legitimate interest” – the latter a genus which had yet to be defined.
Our article observed that the nature and scope of the central registers contemplated by 4MLD may well evolve, and that, while Jersey’s Chief Minister’s Department had pointed out that Jersey was not bound to adopt 4MLD, it was likely that the EU and the UK would place pressure on Jersey to conform. Those observations have proved somewhat prophetic.
4MLD has since morphed into 5MLD
4MLD has since morphed into 5MLD, with the scope of access to company beneficial ownership registers entirely recast. Unequivocally, there will now be full public access. Whereas 4MLD anticipated that only trusts which “generate tax consequences” would need to be registered, 5MLD removes that limitation. 5MLD has not gone so far as to require public access to trust registers, but it does require public access if a trust holds a controlling interest in a company that is not EU incorporated. That potentially undermines the concession (granted at the UK government’s request) that access to trust registers only be granted to those with a “legitimate interest”. 5MLD also introduces the EU’s vision for a European Centralised Platform – a network of interconnected company and trust registers across all member states.
The UK government has exerted significant pressure on Britain’s Crown Dependencies (Jersey, Guernsey and the Isle of Man) and its Overseas Territories to fall into line with publicly accessible company beneficial ownership registers.
That came to a head in May 2018 with the UK’s Sanctions and anti-Money Laundering Act, which requires the UK Secretary of State to order the Overseas Territories to implement such registers, if they have not complied voluntarily by 31 December 2020. It has been the cause of consternation among some of the Overseas Territories, with assertions that the UK has overstepped its power and even calls for a break from the long-standing constitutional ties with the UK.
Similar provisions affecting the Crown Dependencies were removed from this UK legislation at the eleventh hour (constitutional limitations on the power of the UK government to legislate for the Crown Dependencies likely playing a part in that).
Despite the Crown Dependencies ultimately not having being included in the UK Act, it is interesting to note that, while the Overseas Territories have been given a fixed deadline date of 31 December 2020 to implement publicly accessible company registers, the equivalent provisions relating to the Crown Dependencies (had they been adopted) would instead have utilised “the deadline set for implementation of the European Union’s 5th Anti- Money Laundering Directive”.
5MLD was approved by the EU’s Council of Ministers on 14 May 2018. With those revisions, the 2017 deadline for member states to establish centralised company registers has been pushed back to late 2019, and early 2020 for trust registers.
The UK may not have legislated for the Crown Dependencies, but (as the above wording ultimately omitted from the Sanctions and anti-Money Laundering Act suggests), the UK government likely expects that, true to previous form, the Crown Dependencies will voluntarily adopt EU AML legislation in line with timeframes laid down for member states.
If that does occur, and for both company and trust registers the Overseas Territories instead work to the 31 December 2020 deadline imposed upon them, the Crown Dependencies’ company and trust registers would be in place more or less 12 months ahead of those of the Overseas Territories.
Brexit will have occurred by the time these 5MLD deadlines have arrived, and it is difficult to predict how that might affect the UK’s place within the EU vision of a seamless centralised pan-European trust and company register. However, as the UK has been a key proponent of the transparency agenda, it seems unlikely that this will bring a significant policy change on the part of the UK government in terms of its expectations of the Crown Dependencies and Overseas Territories.
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