Chapter 10 - Regulation of trust service providers

Other jurisdictions

Introduction

It is useful, in weighing up the options, to consider how these issues have been addressed in other jurisdictions.

Many other jurisdictions regulate those providing trust advisory services. There are variations, however, in the scope and coverage of the regimes that have been adopted between different jurisdictions. Some only regulate specialist trust companies, while others regulate a broader group of professional service providers.506

At the international level the Offshore Group of Banking Supervisors issued in 2002 its statement of best practice, Trust and Company Service Providers – Statement of Best Practice. The statement has since been endorsed by FATF, the IMF and OECD and sets out what is now an internationally accepted statement of best practice in this area. Many overseas jurisdictions subscribe to the statement of best practice.

Australia

Trustee companies are regulated in Australia but other trust service providers are not. The Corporations Legislation Amendment (Financial Services Modernisation) Act 2009 recently extended and adjusted the financial services regime in the Corporations Act 2001 to cover “traditional trustee company services”. These are defined to include acting as a trustee or otherwise administering or managing a trust. Trustee companies need an Australian financial services licence to operate. They come under the supervision of the Australian Securities and Investments Commission. Trustee companies are subject to certain requirements, including:

  • compliance with general conduct standards, including the requirement to deal with beneficiaries efficiently, honestly and fairly, manage conflicts of interest and ensure that their representatives are appropriately trained and qualified in relation to the provision of traditional trustee services;
  • trustee companies need to have suitable dispute resolution arrangements (both internal and external) if they provide traditional trustee services to retail clients; and
  • trustee companies are subject to enforcement provisions in relation to false and misleading statements and engagement in dishonest, misleading or deceptive conduct.
  • United Kingdom

    In the United Kingdom trust services are subject to anti-money laundering regulation. Trust service providers are covered by the Money Laundering Regulations 2007. All trust service providers (if not exempt from the regime) must be registered with a supervisory body under the regime. Those that are not already under the supervision of the Law Society or a professional accountancy body or the Financial Services Authority must register and be supervised by the Department of Revenue and Customs. The Money Laundering Regulations impose obligations on those covered by the regime to establish and maintain appropriate and risk sensitive policies and procedures relating to customer due diligence, reporting and record keeping, internal control, risk assessment and management, the monitoring and management of compliance.

    Professions such as solicitors and accountants providing trustee services are also subject to professional competence and standards regulation.

    Isle of Man, Guernsey, Jersey, and the Cayman Islands

    The Isle of Man, Guernsey, Jersey and the Cayman Islands all regulate trust service providers under their respective financial services regimes.507 Although the specific range of trust services regulated within each jurisdiction differs slightly, the key features of the regimes are the same.

    All trust service providers covered by the regimes are required to hold a licence and only licence holders can provide the services. Each regime has a regulatory authority that licences service providers and maintains a public register. The regulatory authorities can impose mandatory conditions on the licences they issue.

    The regulatory authority in each jurisdiction is also responsible for monitoring compliance with the regulatory framework and where necessary enforcing it. The regulatory authorities have developed best practice guidance for trust service providers. They also undertake routine inspections to assess compliance, and provide some advice and support to licence holders. Licenced providers are required by the different regimes to act with due skill, care and diligence in carrying on their regulated activities. They must also have adequate systems and controls in place and be able to demonstrate their effectiveness.

    Society of Trust and Estate Practitioners (STEP) “STEP Policy Briefing January 2010 – Trust Reporting Systems – An International Comparison” (2010) Society of Trust and Estate Practitioners at 2 < www.step.org >.   

    See Financial Service Act 2008 (IM); Regulation of Fiduciaries, Administration Business and Company Directors, etc (Bailiwick of Guernsey) Law 2000; the Financial Services (Jersey) Law 1998; and the Caymans under the Banks and Trust Companies Law (2009 Revision).