New Obligations on Trustees of Real Estate under Updated AML Regulations
Declaring a trust of land first became subject to specific regulatory requirements with the introduction in 2019 of the European Union (Anti-Money Laundering Beneficial Ownership of Trusts) Regulations 2019 (the “2019 Regulations”). With effect from 24 April 2021, the 2019 Regulations have been revoked and replaced with the European Union (Anti-Money Laundering Beneficial Ownership of Trusts) Regulations 2021 (the “2021 Regulations”).
Anyone dealing with express trusts, including trustees, beneficial owners and designated persons under anti-money laundering (“AML”) legislation (which can include estate agents/surveyors, solicitors, accountants and other advisors) will need to familiarise themselves with the updated requirements of the 2021 Regulations in order to be able to comply. This briefing considers the implications for trustees of real estate in particular.
2021 Regulations: Context and Overview
The 2021 Regulations coincide with the enactment of the Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Act 2021 (the “2021 Act”), amending the Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Act 2010 (the “2010 Act”) to transpose most of the fifth EU Anti-Money Laundering Directive into law in Ireland.
Fundamentally, though subject to some express exclusions, the 2021 Regulations apply to a “relevant trust”, being an express trust established by deed or other declaration in writing, where the trustees are resident in Ireland or the trust is otherwise administered in Ireland.
Where trustees are not resident in, or a trust is not otherwise administered in, another EU member state, the 2021 Regulations will also apply to trustees entering into a business relationship or acquiring land in Ireland in the name of the trust, but only for so long as that business relationship subsists or that land continues to be so held.
Significantly, the 2021 Regulations require trustees of relevant trusts to maintain a beneficial ownership register, recording specific details of each beneficial owner, and to register beneficial ownership information on the Central Register of Beneficial Ownership of Trusts (or “CRBOT”) to be maintained by Revenue. Relevant trusts established up to and including 23 April 2021 must submit information to CRBOT by 22 October 2021. Trusts created after this date have six months from the date of creation to submit information to CRBOT. Revenue have set up a CRBOT portal accessible via the CRBOT area of www.revenue.ie.
Notably, the penalties under the 2021 Regulations are significantly more severe than under the 2019 Regulations. Non-compliance may result, on summary conviction, to a class A fine or, on conviction on indictment, to a fine of up to €500,000.
Implications for Real Estate Transactions
Looking closer at the implications of this updated AML regulatory regime for trustees of real estate and real estate transactions, it is clear that the acquisition of land in Ireland on trust will trigger the obligation on trustees under the 2021 Regulations to keep and maintain a beneficial ownership register and to submit the relevant details to CRBOT within 6 months. Trustees must maintain the beneficial ownership register and keep CRBOT up to date during the lifetime of the trust. Trustees must also respond to any requests for beneficial ownership information by Revenue, the Gardaí and any other competent authority.
Obligations also exist under the 2021 Regulations for trustees who enter into an “occasional transaction” with a person who is a “designated person” under AML legislation, or who form a business relationship with such person. An “occasional transaction” is a single transaction or series of transactions which are or appear to be linked to each other where the total amount of money paid is greater than €15,000. In such transactions or business relationships trustees must inform the designated person that they are acting as trustee and provide information on the beneficial ownership (as well as the legal ownership) of the trust in certain circumstances and have an ongoing obligation to notify the designated person of any relevant changes to the beneficial ownership register within 14 days of becoming aware of those.
This means that in dealings in relation to the trust property, trustees must consider and identify in each “occasional transaction” or business relationship whether they are dealing with a designated person under AML legislation. Trustees will need to refer to the list of designated persons under the legislation and to be aware that further classes of persons can be designated from time to time. Subject to the exceptions, financial thresholds and other specific terms of the legislation, currently designated persons, broadly speaking, include many of the types of persons involved in a real estate transaction and include property service providers, lawyers, auditors, accountants, tax advisers, trust or company service providers and, of course, credit and financial institutions. Since the coming into effect of the relevant section of the 2021 Act on 23 April 2021, letting agents in respect of transactions for which the monthly rent is at least €10,000 are also now designated persons. Importantly, however, a person is to be treated as a designated person only in respect of those activities or services that render the person a designated person. This means that property service providers, for example, who buy property in their personal capacity, are not designated persons in the context of the personal property purchase. In a typical sale of real estate, however, a selling trustee would be obliged under the 2021 Regulations to disclose the trust to any selling agent, solicitor or tax adviser acting for the trustee in the sale, as each is a designated person for AML purposes and would be acting in that capacity. This is assuming any lender with security over the trust property is already aware of the trust, as that relationship is existing.
Counteracting the ever evolving methods used in money laundering and terrorist financing is an on-going challenge. As the scope of obligations under AML legislation widens, everyone in the real estate industry with relevant obligations needs to be aware of what those obligations mean for them and update their processes and practices accordingly. This includes, whenever a trust is declared, trustees having a formal process of obtaining, recording, and updating the information required on beneficial ownership both for the beneficial ownership register and CRBOT and having mechanisms in place to prompt disclosure requirements and to facilitate prompt replies to any request for information by a competent authority.
For further detail and information, our briefing on the general provisions of the 2021 Regulations is available here.
This document has been prepared by McCann FitzGerald LLP for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.