The reporting requirements for the Trust Registration Service (TRS) have been extended as of 1st April 2023.
As such, businesses subject to the Money Laundering and Terrorist Financing (Amendment) (No. 2) Regulations 2022 are now required to comply with checks of the TRS on an ongoing basis when dealing with a registrable trust as opposed to just when onboarding new customers, as has been the case since September of last year.
HM Revenue & Customs’ (HMRC) online form to report material discrepancies is available here. HMRC said a material discrepancy happens when the relevant person both:
- Holds information about a trust that is significantly different from the proof of registration given by the trustee or agent — this includes when the trust is a registrable express trust that is not registered (the trustee cannot provide proof of registration)
- Reasonably believes the discrepancy has occurred from money laundering, terrorist financing or concealing the business of the trust (whether deliberately or by accident)
According to HMRC, examples of when a material discrepancy should be reported include if:
- You have not seen a proof of registration, even though the trust is supposed to be registered
- You believe proof of registration information you have been given is fake
- You have information which leads you to suspect money laundering or terrorist financing
- In the proof of registration:
- There are clear differences in the trust name, unique tax reference, trust start date or correspondence address
- Personal information about the beneficial owner is wrong (for example, their month or year of birth is incorrect)
- Any of the beneficial owners are missing or wrongly included and should be removed
- None of the trust information matches what you expect to see
HMRC say that the following do not constitute material discrepancies:
- Spelling errors (for example, Jon Smith instead of John Smith)
- Missing, or slightly different spellings of, middle names
- Slight differences in the trust name
Writing on the firm’s website, Pinsent Masons’ Andrew Sackey said the new obligations have passed “largely under the radar”:
“This mandatory requirement is a hugely significant change to the levels of customer due diligence (CDD) and subsequent reporting of material discrepancies which regulated businesses must conduct before establishing, or maintaining, business relationships with relevant overseas entities – which are themselves now required to register their details, those of their beneficial owners and, in some cases, managing officers, in the UK Register of Overseas Entities.”
On the small nature of the number of exemptions, Pinsent Masons; David Hamilton added:
“This means that a significant number of otherwise low risk trusts are now required to register with TRS, including healthcare trusts and certain types of investment trusts. It also means that firms engaging with such trusts must conduct expanded CDD checks even though the trusts present a low risk of money laundering.
What makes this all the more ironic is that trustees of certain non-exempt trusts may themselves benefit from an exemption to register with HMRC for anti-money laundering (AML) supervision on the basis that the trusts are low risk. It will be interesting to see whether officials address this inconsistency. In the meantime, relevant firms doing business with such trusts will have to engineer new compliance frameworks to capture the required degree of TRS data, determine whether the information they receive from trustees during the CDD process is materially different, and report such discrepancies to HMRC.
Aside from the operational challenges this will pose, there are also questions as to whether the lack of a TRS registration should itself be treated as a compliance red flag requiring enhanced due diligence, whether and how payments out of products held under trust may be affected, and whether and how firms should engage with relevant customers to raise awareness of legislative changes and consequences of failing to register as required.”