Recent years have seen a number of calls for public registers of beneficial ownership of companies and trusts, or other things to open up information about ownership and control to compliance officers and the public.

Trusts in the UK have long been private structures, with information on the terms, identity of beneficiaries and trust assets only available to the settlors, trustees and certain beneficiaries. This seems to be about to change.

On 5 July, the European Commission (the nearest thing that the European Union has to an executive branch) published its proposals for amending the EU's fourth Anti-Money Laundering Directive. This directive includes provisions to increase the transparency of companies, trusts and other structures in the fight against tax evasion and terrorist financing, primarily through the establishment of central registers of beneficial owners in each member state. The directive became EU law in May 2015 and was due to be transposed into national law by 26 July 2017, but the dreadful terrorist attacks in Paris and Brussels have now shifted the landscape. The desire to make more information about institutions open to a wide readership, if not the public at large, has risen further up the political agenda.

Trusts are included in the AML directive but, in last year's version, central registers have to be established in relation to 'taxable' trusts only, with the information being accessible by government authorities or obliged entities, not the general public.

What does this mean for HNWs' trusts?

The proposals go further. They say that beneficial owners and controlling persons of 'business-type' trusts ought to be listed on a central public register in each member state, in a similar manner as is proposed for companies. 'Business-type trusts' are defined broadly as trusts held by a person who is running a trust management business, which points towards any trust with a corporate (or professional) trustee.

The European Commission is not proposing that non business-type trusts, such as those with trustees acting in their personal capacities, ought to be searchable by the public, but it nevertheless wants their details on central national registers available to competent authorities (such as HM Revenue and Customs) and parties with a "legitimate interest". The latter is likely to include non-governmental organisations and potentially investigative journalists. The national registries will be connected to one another so that people in all member-states can look at information from all other member states.

Looking into the crystal ball

What does this mean for trusts in the UK? It is difficult to say with any certainty at present. Firstly, these are only proposals at this although there seems to be a political head of steam behind them. Secondly, there is now a question-mark over whether the UK will want or need to transpose any new directive now that it is leaving the EU.

The directive is likely to become EU the UK formally leaves the EU, but it remains to be seen whether there is enough political will in the UK to force reporting institutions to obey it, or whether the European Commission will challenge the UK if it fails in this regard.

Regardless of Brexit, the UK has demonstrated its commitment to making information about beneficial ownership publicly available. It has led the way in the corporate sphere with the introduction of legislation requiring UK companies to maintain a public register of "people with significant control" (effective on 6 April) and there were more than 28,076 beneficial owners on record on 8 July, with more to come.

Furthermore, on 14 April, HM Government and the other 'Group of 5' industrialised nations issued a letter that made their commitment to establishing central registers of beneficial owners of companies, trusts and other structures crystal clear. Notably, however, the letter only proposed to make information available to tax administration and law enforcement agencies, not to the general public.

A sensitive area

This is a difficult and sensitive area. Trusts are long-established, traditional vehicles for preserving assets and wealth planning. In many cases, the rationale behind a trust and who the trust is intended to benefit is extremely personal and if such information is to be made public, it could lead to anxiety and be divisive within families – for instance where the settlor has named beneficiaries whose identities he wishes to keep private, as might be the case with illegitimate children, or where he has given his children unequal interests.

Concerns remain over privacy and safety where minor and vulnerable beneficiaries are concerned (although the AML directive proposes to allow member states to exempt data on such individuals from being accessed in some cases). The vast majority of family trusts in the UK are set up entirely legitimately for asset-preservation or personal reasons, or even charitable aims.

The drive towards greater disclosure (at least to a growing number of officials) is continuing and it looks fairly certain that it will include trusts; but it remains to be seen whether this is done under the EU's AML directive or bespoke UK legislation. For high net worth individuals with trust interests, there is a lot at stake.

* Camilla Wallace can be reached on +44 (0)20 7406 1678 or at cwallace@wedlakebell.com