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There may be trouble ahead!

3 min

When Irving Berlin penned these lyrics, he wasn’t thinking about the burden about to be placed on all UK charity trustees. But the words are strangely appropriate to changes due in a little over 18 months’ time! The song goes on:

before the fiddlers have fled,
before they ask us to pay the bill,
and while we still have the chance,
let's face the music and dance.

This article seeks to prepare us all so that we can face the music rather than having to pay a bill for being unaware of, or ignoring, the ‘trouble’ ahead.

What is this foreboding for charities I hear you ask?

The government’s implementation of the EU’s 5th Money Laundering Directive requires a Trusts Register to be established no later than 10 March 2020. All UK trusts (including charities) will have to register with the Trusts Registration Service (TRS); provide certain data on their charity; and keep that data up to date on pain of penalties, whether for late registration or for not updating the register.

Data required

Some of the language used may be unfamiliar and application of it to charitable trusts may be challenging. Good HMRC guidance will therefore be essential. In relation to each charity, the directive requires details of the:

  • settlor;
  • trustee(s);
  • beneficiaries or class of beneficiaries, and any other natural person exercising effective control of the trust.

And for each individual in the above list, their:

  • full name;
  • date of birth;
  • nationality;
  • country of residence;
  • the nature of the individual’s role in relation to the trust.

And for each corporate entity in the above list, the:

  • legal entity’s corporate or firm name;
  • registered or principal office of the legal entity;
  • nature of the entity’s role in relation to the trust.

The government may wish to collect some additional identifying information: for example, National Insurance or passport numbers.

Data disclosure

The data collected will be accessible to certain persons including individuals or businesses that are already subject to the money laundering regulations, such as banks, accountants and lawyers, as well as those that can demonstrate a ‘legitimate interest’ in access to information on a specified trust.

Deadlines

The government proposes that, for:

  • charities already in existence on 10 March 2020, a registration deadline of 31 March 2021;
  • charities created on or after 1 April 2020, registration within 30 days of creation, usually as part of the set-up process;
  • amendments to the registered data (such as a change in trustee or contact details), completion within 30 days.

The government will consider if other registration services for particular trust types could fulfil the directive’s requirements. It will simplify things for all concerned if the Charity Commission, OSCR and CCNI can fulfil this role for charities.

Penalties

The penalty regime has yet to be settled. A detailed HMRC technical consultation to be published later this year will include additional information on the proposals for data collection, data sharing and penalties. We are assured that the registration process and any associated penalty regime will be applied proportionately. That said, it is clear that the EU directive does not provide scope for carve outs, exemptions, or de minimis thresholds.

Brexit?

As it’s an EU directive, the inevitable question is whether the UK’s departure from the EU will change anything. This is unfortunately doubtful. As an international measure that underpins the strength and reputation of member states’ financial markets, the UK will be keen to similarly protect its own reputation inside or outside of the EU.

Preparation

At this stage, the best advice is to be aware of what is up and coming, to keep an eye on future announcements in the run up to the new regime and, as details become firmer towards the end of 2019, to make sure that the required information is to hand. This will avoid the prospect of a regulator knocking at your door after the event, asking why you haven’t complied.

Conclusion

With apologies to Irving Berlin, the money laundering fiddlers will always be with us. So, let’s minimise the risk of having to pay the bill by preparing ahead of time so that we can face the music and dance!

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