Legal Notice 373 of 2017, Trusts and Trustees Act (Register of Beneficial Owners) Regulations, 2017 (hereinafter the ‘Regulations’) was recently enacted to implement the relevant provisions on beneficial ownership information of Directive 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing and are applicable to trusts under the Trusts and Trustees Act in Malta. The Regulations shall come into force on the 1st January 2018 with the exception of access to the register of beneficial owners which shall come into force on the 1st April 2018. The Regulations shall only apply to an express trust which has tax consequences.
Definition of Beneficial Owner and Material Actions
In terms of the Regulations, a beneficial owner shall be specifically applied to the following:
- The Settlor
- The Trustee
- The Protector (if applicable)
- The Beneficiaries or individuals benefitting from, the class of persons in whose main interest, the trust is set up or operates
- Any other person exercising ultimate and effective control over the trust by any means, other than those mentioned above, whose consent is to be obtained or whose direction is binding in terms of the trust instrument or any other instrument in writing for material actions to be taken by the trustee.
Material actions shall have the following meaning:
a. The amendment of the trust instrument.
b. The addition or removal of any beneficiary or any person from a class of beneficiaries or any action affecting the entitlement of a beneficiary.
c. The appointment or removal of trustees or protectors or to give another individual control over the trust.
d. The acceptance of an additional settlor as may be applicable in terms of the trust instrument.
e. Any change of the proper law of the trust.
f. The assignment or transfer of all or most of the assets of the trust or the termination or revocation of the trust.
Declaration of Beneficial Ownership
From the 1st January 2018, a licensed or otherwise authorized trustee of an express trust shall submit to the Malta Financial Services Authority (hereinafter the ‘Authority’) a declaration of beneficial ownership in the form set out by the Authority, in respect of every trust that has tax consequences.
The declaration of beneficial ownership shall include the following information on all the beneficial owners of the trust and shall be signed by the trustee:
- The name
- The date of birth
- The nationality
- The country of residence
- An official identification document number indicating type of document and country of issue
- The role of the beneficial owner in relation to the trust
- The nature and extent of the benefit (where applicable)
- Whether the trust instrument includes any suspension of the trustee’s duty to inform such beneficiary of his benefit under the trust or that he forms part of a class of beneficiaries which may benefit (where applicable)
When the beneficiaries of a trust are a class of beneficiaries, the following rules shall apply unless the trust instrument indicates otherwise:
- The class shall be described and its members declared.
- When reference is made to the ‘family’ of a person, the class is considered to be made up of the person, his direct ascendants, his spouse, his direct descendants and unless excluded, respective spouses.
- When a child is born or a marriage takes place, unless stated otherwise, such child and spouse shall be declared within three months of the birth or marriage.
The information shall be submitted to the Authority as soon as a beneficiary is determined from such a class or is appointed as a beneficiary under the trust whichever is the earlier.
When a trust is set up solely for a charitable purpose and which does not have any beneficiaries, the trustee shall only be required to provide the beneficial ownership information relating to the settlor, protector if applicable and any other person exercising ultimate and effective control over the trust by any means, including any person whose consent is to be obtained, or whose direction is binding in terms of the terms of the trust instrument or of any other instrument in writing, for material actions to be taken by the trustee.
A trustee is required to carry out customer due diligence in terms of Maltese law and shall not enter the name of any beneficial owner in the declaration of beneficial ownership, unless it has carried out such customer due diligence.
Register Beneficial Owners
The information on the beneficial owners of every express trust provided to the Authority shall be held by the Authority in a register of beneficial owners. When there is a change in the beneficial ownership of an express trust which generated tax consequences, the trustee shall, within 14 days after the date on which the change is recorded by the trustee, notify the Authority of the change, providing information on the new beneficial ownership and the effective date of the changes made, which changes shall be entered into the register of beneficial owners. In the event of a change of trustee, it shall be the duty of the new trustee to notify the Authority of such change.
A trustee shall submit annually, not later than the 1st January of each year, a declaration confirming that there have been no changes to the beneficial ownership of the trust in the previous calendar year other than any changes notified as specified above.
Access to the Register of Beneficial Owners
The Register of Beneficial Owners shall be accessible 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, associated criminal offences and terrorist financing, or of tracing, seizing, freezing, and confiscating criminal assets.
- The Financial Intelligence Analysis Unit.
- National tax authorities.
- Any other national competent authority with the meaning assigned to it under the Prevention of Money Laundering and Funding of Terrorism Regulations, not already covered as per the above, in a timely manner, without restriction and without alerting the beneficial owners concerned.
- Subject persons in terms of the Prevention of Money Laundering and Funding of Terrorism regulations for the purposes of carrying out customer due diligence in accordance with the said regulations in a timely manner. Provided that such subject persons may be required to submit the following documents to the Authority:
- A letter addressed to the concerned person.
- A power of attorney, license, warrant, or other evidence of the function of the subject person.
- A declaration that the purpose of the enquiry relates to the duties of the subject person or alternatively the basis of such request.
- Any other document which the Authority deems necessary.
Access to information on the register of beneficial owners of a trust may not be granted, in full or in part, where in exceptional circumstances to be justified by means of documentary evidence and to be determined on a case by case basis, access to such beneficial ownership information would expose the beneficial owner to the risk of fraud, kidnapping, blackmail, violence or intimidation or whether the beneficial owner is a minor or otherwise incapable.
The authorities referred to may, in pursuance of their functions in accordance with applicable law, provide information on beneficial owners accessible to them to competent authorities and to Financial Intelligence Units of other Member States of the European Union and third countries.
Trusts Set Up Prior to Regulations
Every trustee in respect of every express trust which generates tax consequences which was set up prior to the coming into force of the Regulations shall submit to the Authority a declaration of beneficial ownership in the form set out by the Authority within six months from the 1st January 2018. In the event that a trustee contravenes or fails to comply with the Regulations, the Authority may impose an administrative penalty which shall not exceed Euro 150,000. Provided that a trustee shall not be held liable if it is shown that the trustee exercised all due diligence to comply with the provisions of the Regulations and the default was not due to negligence on the part of the trustee or any of its officers as may be applicable.