Insights

Money Laundering – more things to look out for

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Joe Spencer · September 6th 2022 · read

Money laundering is a worldwide problem and as part of the EU anti-money laundering directive, the UK set up the Trust Registration Service in 2017, and it was agreed as part of the Brexit Withdrawal Agreement that this would be maintained in future.

Accordingly, virtually all trusts are now required to register with the service. Indeed, registration should have taken place by 1st September 2022 for existing trusts and 90 days after creation for those set up since 4th June. Only excluded trusts are not required to register such as:

a trust used to hold money or assets of a UK registered pension scheme or registered charity,
a trust used to hold life or retirement policies which only pay out for healthcare or on death, terminal or critical illness or permanent disablement,
a ‘pilot’ trust set up before 6^th October 2020 and holding no more than £100,
a co-ownership trust set up to hold shares of property or other assets which are jointly owned by two or more people for themselves as ‘tenants in common’,
a will trust which comes into effect on their death and is wound up within two years,
a trust for bereaved children under 18, or adults aged 18 to 25, set up under the will (or intestacy) of a deceased parent or the Criminal Injuries Compensation Scheme,
a ‘financial’ or ‘commercial’ trust created in the course of professional services or business transactions for holding client money or other assets

It will be noted the “bare trusts” are required to register unless they hold only bank deposits, as are joint ownership trusts where the registered and beneficial owners are not identical.

As usual there is an enforcement policy, using fines of between £100 and £5000, although HMRC have indicated that, given what appears to be a massive lack of publicity and possibly millions of trusts which are unaware of the changes, compliance will initially be driven by a programme of “nudges”. Nonetheless, those with trusts that do not fall within the exclusions should take steps to register as soon as possible.

Another register has been introduced by the “Economic Crime (Transparency and Enforcement Act 2022)", which includes offshore trusts owning UK property, along with all overseas entities which own or lease property or land in the UK. Information will be required to include the nature of the entity and its beneficial owners. The register is being maintained at Company House and the entity ID will be linked to Land Registries across the UK.

Registration here is required by 31st January 2023, there will be a £100 registration fee and an eye-watering range of fines for non-compliance which include a daily penalty of £2500 or a prison sentence of up to five years. In this case, the legislation seems to encourage companies to use an agent to make the filing, since even those which intend to deal with the registration themselves will still need to use an agent to confirm the identity of the filer.

Whilst the covering letter from Companies House acknowledges that, “most overseas entities who own land in the UK are not breaking the law” the intention is clearly to create “greater transparency (which) will allow law enforcement agencies to investigate suspicious wealth more effectively”.

Whilst overseas entities owning (or leasing) UK land and property are not widely used they are by no means unknown. Apart from those structured for tax purposes, such companies can also exist for purely family reasons, for security purposes or simply because offshore investors see them as a convenient way of managing a UK property portfolio.

According to MHA agricultural partner, Joe Spencer, “after quite a long period of consultation, the trust register rules are now in place and will affect far more people than was expected. No one even knows how many trusts are out there, because so many have produced no income and have never needed to register. The numbers may run into millions and anyone who has an unregistered trust which is not an excluded trust, or who is connected to an overseas entity with UK property interests should take professional advice as soon as possible”