The Financial Action Task Force (FATF) is in the process of reforming Recommendation 25 on beneficial ownership transparency of trusts and other legal arrangements. This report explains the risks created by trusts and why these risks justify the call for increased transparency. The call for trust registration is supported by the findings of the 2022 edition of the Tax Justice Network’s Financial Secrecy Index which found that more than 120 countries already require some type of trust registration, including 65
with some type of beneficial ownership registration.
The Financial Action Task Force (FATF) should:
1. Require the “registry approach” for trusts under the Reform of Recommendation 25.
All countries should:
2. Require trusts to register to have legal validity.
3. Establish central registers to collect beneficial ownership information on all trusts that: (a) are created according to, or governed by local laws; (b) have any asset or operation in the country; or (c) have any party who is resident in the country.
4. All parties (settlors, trustees, protectors, beneficiaries, and any other individual with control or benefit) to a trust (including unit trusts used for investment funds) should always be required to be identified as beneficial owners before they are allowed to enjoy any power or control, or receive a distribution.
5. When a trust owns a company, all the parties to the trust should be considered the beneficial owners of the company (not just the trustee or “any person with control over the trust”)
6. When a party to the trust is a legal person (eg a company), all the beneficial owners of the company should be identified as beneficial owners of the trust, ideally without applying any threshold. Even if the beneficial ownership definition for companies usually applies thresholds, eg “anyone with more than 25 per cent of shares”, no thresholds should be applied when a company is a party to the trust.
7. Provide public access to information on trusts, just as is done with legal persons similar to trusts such as private foundations. Public access should ideally be online, free and in open data format.
8. Prohibit discretionary trusts.