BY MATTHEW SMITH
On 10 January 2020, the European Union’s Fifth Anti-Money Laundering Directive (‘5AMLD’) came into force and included a requirement for member states to implement Beneficial Ownership Registers which could be made accessible to members of the public in certain circumstances. EU legislation must be implemented not just in the EU member states, but also in the three jurisdictions which, while not EU member states, are included within the European Economic Area (‘EEA’): Iceland, Norway and Liechtenstein.
Liechtenstein introduced the Act on the Register of Beneficial Owners of Legal Entities (the ‘Act’) in April 2021 in order to bring 5AMLD into effect there. However, only more recently has the scope of the Act, and its potential implications for the beneficial owners of entities holding bank accounts in Liechtenstein, been confirmed.
Scope of Legislation and Obligations for Trustees
A trustee of an international trust will now be required to provide specified information on the trust’s beneficial owners for inclusion in the Liechtenstein Register of Beneficial Owners (the ‘Register’) where the trust acquires real estate in Liechtenstein, or where the trustee enters into a business relationship in Liechtenstein on or after 1 October 2021 with a Liechtenstein person who is subject to due diligence requirements. This includes opening an account with any Liechtenstein bank. For these purposes, ‘beneficial owner’ includes any individual trust settlor, or any owner or controlling person of a company which is the settlor of a trust. The information which must be provided for inclusion in the Register is the full name, date of birth, country of residence and nationality of each beneficial owner.
The Act does not apply to Liechtenstein bank accounts which are held by an international company (including an international company owned by an international trust), only to trust accounts. The beneficial owners of company account holders are not, therefore, required to provide this information.
Accessibility of Information
The Register is centrally held but is not – at this point – accessible in all circumstances to all members of the public. Any person seeking information from the Register must apply for its disclosure. Under the Act, information held in the Register may be disclosed to:
• the Liechtenstein authorities, either at their request or in response to a request from a foreign authority;
• any EU or EEA bank or financial institution;
• any Liechtenstein person which is subject to Liechtenstein due diligence legislation; or
• on payment of a fee, any domestic or foreign person or organisation which provides a statement that the data they are requesting is required to prevent money laundering, predicate offences to money laundering, or terrorist financing.
Beneficial ownership information remains on the Register until five years after the close of the business relationship which gave rise to the obligation to provide it – so in the case of a banking relationship, five years after the closure of a trust account.
Implications for Southpac Clients
Going forward, all beneficial owners of trusts which are opening an account with a Liechtenstein bank will be required, as a precondition of account opening, to authorise the bank to provide their personal information for inclusion in the Register.
The beneficial owners of trusts which hold an existing Liechtenstein bank account (opened before 1 October 2021) are not required to provide this information. However, this could change at any time. Beneficial ownership laws throughout the world have historically shown themselves to be prone to ‘mission creep’. Given the general direction of travel in several other jurisdictions, it is far from inconceivable that what is currently a register of limited availability for new clients will become a register which is generally accessible online and which is required to hold information on beneficial owners of existing accountholders. In this scenario, trust accounts may conceivably be blocked from transacting (or closing) until beneficial owners consent to their personal information being included in the Register.
Southpac will not authorise the inclusion of any client information in any beneficial ownership register without the express consent of the client concerned.
Beneficial owners who have privacy concerns regarding the maintenance of a Liechtenstein bank account may wish to consult with the trustee to discuss alternative account options in countries such as Switzerland (which is not in the EU or EEA) or the Cook Islands which have no plans to introduce beneficial ownership registers.
Around the World
As I wrote here last year, beneficial ownership registers have been – or are being – introduced in some form or another in multiple jurisdictions outside of the EU and EEA, including in major financial centres such as the USA, the UK (which has very recently passed enhanced legislation in this area, ostensibly to increase transparency surrounding beneficial ownership of UK real estate by Russian oligarchs), Hong Kong, the Cayman Islands and the British Virgin Islands.
The Cook Islands and Nevis maintain stringent and robust legislation to prevent money laundering, terrorism financing and the use of trusts and corporate structures for illicit purposes. Service providers are required to obtain extensive due diligence prior to entering into transactions and business relationships. As a result, each of these jurisdictions has opted for a more proportionate approach than have many other international financial centres. There are no intentions in either jurisdiction to introduce centrally-controlled registers of beneficial ownership, publicly accessible or otherwise, or to dilute the privacy protections that beneficial owners of Cook Islands or Nevis trusts and companies continue to enjoy.
For more information or to open up a discussion with a member of our team about trust account options, please Contact Us.
Disclaimer: the above contains the opinion of the author and is for information purposes only. It is not intended to constitute legal or tax advice. If you are considering establishing an offshore structure, please consult with legal and tax professionals in your jurisdictions of residence, domicile and tax residence beforehand.