MFSA: Increased regulatory oversight of trusts and trustees

Dr Petra Camilleri is a Senior Manager – Conduct Supervision at the MFSA

It is crucial, now more than ever, that Malta lives up to its commitment to strengthen the fight against money laundering and terrorist financing across the EU.

Having reliable central beneficial ownership registers, as required by the Anti-Money Laundering (AML) Directive, is an important milestone in this process.

Malta transposed the 5th AML Directive in January 2020, but what are the main implications of this with respect to beneficial ownership registers?

In its fourth take on the AML directive, the European Union aimed at approaching the fight against money laundering and terrorist financing from different angles. The directive increased focus on promoting the transparency of all types of different legal entities and legal arrangements which may, at times, be utilised to shield, or layer, the identity of the person ultimately controlling and benefiting from certain structures. This was, in fact, the underlying rationale for EU Member States to set up and maintain registers of beneficial ownership information of all legal entities and trusts. 

As a result, Malta also set up these central registers in order to comply with the relevant EU law requirements. The MFSA is responsible for the setting up and maintenance of the central beneficial ownership register of trusts, wherein all licensed trustees are obliged to report the beneficial ownership information of trusts under their administration which generated tax consequences.  An online platform for the Trusts Ultimate Beneficial Ownership Register (TUBOR) was also launched by the MFSA in January 2019. As required by the 4th AMLD, the beneficial ownership information held in the register was made accessible in an unrestricted manner to various national competent authorities referred to in the Regulations, including the Financial Intelligence Analysis Unit  (FIAU),  national tax authorities and the police, as well as subject persons for the purpose of carrying out due diligence. 

On the other hand, the 5th update to the AML Directive (5th AMLD) was a response to various developments which came about in 2016, namely certain terrorist attacks across the EU and the offshore leaks investigated in the Panama papers. Following these events, Member States pushed for even greater scrutiny on legal entities and arrangements to prevent the abuse of anonymous structures by the criminal and corrupt.

The 5th AMLD required that the beneficial ownership registers of companies and other legal persons be made accessible to the public (as opposed to having to demonstrate a legitimate interest as was the situation under the 4th AMLD). In Malta, these can be accessed from the website of the Malta Business Registry. With regard to the Trusts Beneficial Ownership Register, which can be accessed on a dedicated section in the MFSA website – https://tubor.mfsa.com.mt/ – access is not required to be public by the 5th AMLD. Nonetheless access was extended to any person who can demonstrate a ‘legitimate interest’, as well as to a person who makes a written request to view the beneficial ownership information of a trust which owns a company that is not incorporated in the EU.

The updated legislation also reflected the 5th AMLD’s broadening of the scope of reportable trusts, by capturing all trusts under the administration of licensed trustees in Malta, irrespective of any tax consequences or otherwise.  Reportable trusts are expected to have a tenfold increase. Moreover these reporting requirements now also apply to any trustee of a trust whose place of establishment or residence is outside the EU, where such trustee enters into a business relationship or acquires real estate in Malta, in its capacity as trustee of a trust.

The transposition of the AML Directive amendments enhances transparency in the fight against money laundering and terrorist financing. These are all positive steps forward to reduce the economic as well as social implications of profit-motivated crime.  

Note: A Beneficial Ownership Register is a register which provides details such as name, date of birth, nationality, residence and extent of beneficial ownership of all the relevant parties in an entity.