Over the past decade, there has been significant focus and emphasis placed on ensuring the BOT of corporate vehicles. Whilst considerable progress has been made in promoting and implementing the BOT of legal entities, including the establishment of central BO registers worldwide, the issue of the BOT of trusts and similar legal arrangements remains underexplored, with limited attention and work focusing on ensuring the BOT of trusts. As it becomes apparent from this policy brief and OO’s An introduction to trusts, trusts are highly complex and secretive asset holding legal arrangements, which can be even more slippery than offshore shell companies. Moreover, the lack of understanding and uniformity among jurisdictions on the concept and treatment of trusts has also contributed to making these legal arrangements highly desirable for criminals. Whilst efforts have intensified by the regulatory bodies in the last few years to ensure the BOT of trusts, including the requirement to establish a central BO register for trusts by the AMLD5, there is still room for a lot of improvement at policy and regulatory level, as highlighted by this paper.
This paper has identified emerging best practice. Ensuring the BOT of trusts is highly important to effectively combating financial crime, including money laundering, corruption, and terrorist financing. Similar to the central BO register for legal entities, the establishment of a central BO register for trusts is the best way forward. An initiative in this regard has already been taken by the AMLD5, the only framework which requires the establishment of central BO registers for trusts. The framework also has fewer loopholes with respect to when to disclose information and what information to disclose. However, these countries are still at too early stages of establishing trusts registers to learn much from their practical experience. This policy briefing, along with the OO Principles on the effective disclosure of the BO of legal entities, provides a useful framework for thinking about how best to implement transparency in the BO of trusts. However, there are some key differences in discussions on certain aspects, such as whether information should be made public. Where jurisdictions are implementing BOT of legal persons, and when trusts feature in the ownership structure of a legal person, the information on the BO of trusts should, at a minimum, be made available to the public.
As more jurisdictions continue to implement BOT for legal persons, implementers – including in non-trust law jurisdictions – will have to find ways to deal with the role of trusts in the ownership structures of legal entities. OO will continue to learn and update its thinking on best practice and develop practical guidance for implementers.
Areas for future research
Undoubtedly, due to the nature of the trusts and their complexity, there are questions which need further probing and research. Some of the questions which might serve as an agenda for future in-depth research include:
- undertaking a comparative analysis of jurisdictions on their treatment of trusts or similar legal arrangements, including the deficiencies that have been identified in their legal, regulatory, and implementation framework in complying with international standards;
- the effectiveness of the current international legal and policy framework in ensuring the BOT of trusts, and whether these measures are sufficient;
- the risk that trusts pose to the implementation and effectiveness of the BOT reforms for legal entities if, for example:
- there is no equivalent BOT reform for legal arrangements;
- there is an equivalent but legally and institutionally separate BOT reform for legal arrangements;
- there is an equivalent and unified BOT reform for both legal entities and legal arrangements; and
- identifying and establishing appropriate BO disclosure principles for trusts and other legal arrangements, taking into consideration different types of legal arrangements of trusts, methods of describing classes of beneficiaries, trust documents, methods for exerting and changing ownership and control of trusts, disclosure and publication barriers depending upon domestic laws and feasibility of reforms.