The Society of Trust and Estate Practitioners have welcomed the Government's rethink on draft money laundering regulations which would have confused anyone who held their home in a trust.
Earlier this week Ed Balls, Economic Secretary to the Treasury, revealed he had written to the Law Society, STEP, and other trade bodies and financial supervisors, agreeing to revise the regulations in relation to the term ‘beneficial ownership’.
STEP had raised concerns in January when it commissioned an opinion by two leading Counsel on how the regulations relating to trusts, and the term ‘beneficial ownership’ could be applied to everyday trusts.
Following the opinion, which claimed the term was “unworkable” under UK law, STEP says it has been working in tandem with the Treasury to find a solution to the problem, and make the regulations clear and workable.
As a result, the organisation says the revised regulations announced by Balls will stave off confusion among property investors; families where a homeowner dies without a will and people who have set up trusts to pay university fees or to hold property.
STEP says it had also been concerned ordinary families could have suffered confusion from the regulation which would have led to increased costs when using a trust, and says the revisions will provide legal clarity.
Keith Johnston, director of policy and communications at STEP, points out the organisation had demonstrated in January that the EU’s definition of beneficial ownership was incapable of being applied to everyday trusts.
He adds: “We have worked constructively with HM Treasury to help provide a new definition which will provide legal certainty – a basic requirement of statute. This was an area of great concern to our members and this is a major step forward.”
However, the Law Society says the Government's change of stance came after the organisation's Brussels office sought assistance from the European Commission regarding the flexibility available to them in implementing the directive.
As a result, last week, Commissioner Charlie McCreevey explained that adapting the wording of directives to suit national legal frameworks is at the very heart of the directive process, after the Society had provided the EU with legal advice from Matrix Chambers, which said the definition so lacked clarity that it was unlawful and could not be fixed by professional guidance.
Fiona Woolf, president of the Law Society, says the organisation has long expressed concerns that the directive’s wording did not reflect the UK’s common law usage of trusts.
She adds: "Trusts are used extensively in everyday life, from wills, to charities, to collective investment products. The definition of a beneficial owner was so unclear that it made it impossible for a solicitor to know who should be the subject of client due diligence. It would have placed a huge burden on solicitors and deterred investment into the UK."
The Treasury has provided interested stakeholders with a two-week window to provide feedback on the revisions, with all responses to be handed in by 18 June.
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