1. Which trusts are affected?
The Regulations apply to express trusts (being trusts set up in writing) which generate tax consequences (irrespective of how the trust is treated or elects to be treated in terms of the Income Tax Act, Cap 123 Laws of Malta) (‘express trusts’).
2. Obligation on the Trustee
The Regulations create the following obligations:
- they require trustees authorised in terms of article 43 or article 43B of the Trusts and Trustees Act (‘TTA’) – thereby excluding private trustees regulated by article 43A of the TTA – to submit to the MFSA a declaration of beneficial ownership (as the term is defined therein) within 14 days of being appointed to act as trustee of an express trust. MFSA will hold such information in a register of beneficial owners for the purpose. In accordance with the requirements of Directive EU/2015/849 of the European Parliament and the Council of the 20th May 2015, the register of beneficial owners held by the MFSA will be interconnected with the central register of Member States.
- in the case of authorised or registered trustees already acting as trustees (of express trusts which generate tax consequences) at the time of the coming into force of these Regulations, the information is required to be submitted to the MFSA within 6 months of the coming into force of the Regulations (and therefore by the 1 July, 2018).
- where a change in beneficial ownership (of an express trust) occurs, the trustee must within 14 days from when the change is recorded by the trustee, notify the MFSA providing information on the new beneficial owners as well as the date on which the changes are effected.
- a change in trustee must also be notified to the MFSA by the new trustee.
- the trustee must annually (and in any case by not later than the 31 January of each year) submit a declaration confirming that no changes have been made to the beneficial ownership of the trust in the previous calendar year.
The Regulations list the information that is required to be provided.
The term ‘Beneficial Owner’ includes the settlor, the trustee, the protector and the beneficiaries and where the latter are yet to be determined, the class of persons who may benefit under the trust and any other person exercising ultimate and effective control over the trust. The Regulations includes rules which deal specifically with trusts with discretionary beneficiaries.
More importantly the information on the beneficial owners (of an express trust) will be made accessible, as follows:
A. WITHOUT ANY RESTRICTION AND WITHOUT ALERTING THE BENEFICIAL OWNERS, TO:
- national competent authorities with designated responsibilities for combating money laundering and terrorist financing;
- national competent authorities that have the function of investigating or prosecuting money laundering
- the FIAU;
- national tax authorities; and
- any other national competent authority within the meaning given to it under the Prevention of Money Laundering and Funding of Terrorism Regulations (S.L. 373.01).
B. IN A TIMELY MANNER, TO:
- subject persons in terms of the Prevention of Money Laundering and Funding of Terrorism Regulations for the purposes carrying out due diligence obligations. Here Member States were given an option as to whether to open up access also to subject persons who, it is submitted, qua subject persons rendering a service to the trustee are anyway obliged to carry out CDD and would (or at least should) anyway have the necessary information on the beneficial owners. Malta opted to take up this option.
In the latter case, the Regulations state that subject persons may be required to submit to the MFSA certain documentation such as a letter of engagement with the subject person as well as that, in exceptional circumstances, the MFSA may refuse access to the beneficial ownership information if such access would expose the beneficial owners to risk of fraud, kidnapping, blackmail, violence or intimidation, or in the case of a minor or incapable person.
Both receipt of information and access to said information is subject to the applicable data protection laws and rules in relation to the processing of personal data, although these are not elaborated on in any manner in the Regulations.
These Regulations will come into force on the 1 January 2018, except that access to beneficial ownership will come into effect on 1 April 2018.
Failure to comply with the Regulations may result in the imposition of an administrative penalty of up to EUR150,000.