Chapter 9 - Registration and reporting requirements

 

Overseas approaches

The regulation of trusts is approached differently in different countries. It seems that New Zealand has some of the least regulation and lowest information collection requirements for trusts of any comparable country.

Scotland

The Scottish Law Commission raises the question of whether Scottish trust deeds should be required to be registered in the Books of Council and Session or in a new register of trusts. They comment that the relative simplicity of the trust as a legal concept and its consequent utility in a wide range of contexts would be undermined if the steps necessary to constitute a standard trust became too formalised. They express the provisional view that no more than a written declaration of trust should be required to establish a trust. They note that there are advantages of registration, but that they are reluctant to add a further formality and expense to the constitution of a valid trust.466

The Commission also discusses registration of trusts in the context of what is known in Scotland as “truster-as-trustee” trusts, trusts where the settlor becomes the sole trustee. They are treated somewhat differently to other trusts because they are the exception to the rule that a declaration of trust does not have to be constituted in writing.467 There is a particular risk with this type of trust that the trust could be set up without the knowledge of anyone other than the settlor and beneficiary and without any indication to a third party that the property which constitutes the trust fund has been moved “from the [settlor’s] private patrimony to his trust patrimony and is therefore no longer available to his personal creditors.”468 The Scottish Commission raises the question of whether, because of their potential for abuse, these types of trusts should be registered in a public register such as the Books of Council and Session. They see some force in the argument that registration should be required for these trusts.469

Australia

Unlike New Zealand, Canada and the United Kingdom, Australia requires that all trusts are registered with its Tax Office regardless of whether they earn income. All trusts are required to lodge annual tax returns unless the Tax Office advises them otherwise.470 Some Australian states require stamp duty to be paid for every declaration of trust.471

 

Canada

In Canada there is no legal requirement for trust service providers to collect information on the settlor, trustees and beneficiaries, although this would normally be done in practice anyway. There is no system of central registration of trusts and no legal requirements for record-keeping. There are registration and information provision requirements in the case of trusts that also fall within the definition of “financial entity” and trusts that are required to lodge a tax return. Trusts that must make returns to the Canadian Revenue Agency are required to provide specific information on the name of the trust, type of trust, amounts of income and property, including foreign property and personal details of those administering the trust, and a copy of the trust deed. This information is not available for other government purposes and is not publicly available.472 

United Kingdom

There are no general registration requirements for trusts in the United Kingdom. As with most jurisdictions, trusts that earn income or make capital gains are required to file a tax return.473 Trustees must notify the Revenue and Customs Office when a new trust that will receive income or make capital gains is established, or a trust that previously did not do either of these begins to do so. The Money Laundering Regulations 2007 (UK) impose responsibilities on providers of services in relation to the formation, operation and management of trusts. These provide for registration, information and record-keeping requirements for these providers.474

United States

State jurisdictions in the United States have chosen not to regulate trusts in the way that other corporate vehicles are regulated. United States authorities have confirmed that this is because in the United States a trust is viewed essentially as a contractual agreement between two private persons. This means that there are no registration requirements, other than tax filing requirements for trusts that earn income.475

Cayman Islands

There is no central reporting requirement for trusts in the Cayman Islands. Neither is there a register of all trusts. Provision of trust services is a regulated activity and there is a regulatory regime for trust service providers, which makes them subject to recordkeeping, due diligence and other requirements.476 Trust service providers must keep records of all trusts, which can be accessed by a regulator. The requirements on trust service providers mean that information on the beneficial ownership and control of trust property is readily accessible by the authorities when there is suspected criminal activity, but less so for other purposes.477

Jersey

The legal arrangements for trusts in Jersey are similar to those in the Cayman Islands. A regulated trust service provider approach is used to address the anti-money laundering issues. Those involved in business as a trustee conduct a “regulated activity” under the Proceeds of Crime (Jersey) Law 1999. This means that professional trustees are subject to registration requirements, although there are no general requirements for the registration of a trust.478

Singapore

There is no general register for trusts in Singapore. Trustee companies and trust company service providers are required to collect and maintain records of information on the beneficial ownership and control of trusts.479 Recently, the Council of the Law Society of Singapore has issued a practice direction requiring lawyers to also take measures to obtain information on the beneficial ownership of trusts for which they are acting or doing business.480 Singapore has concentrated more rigorous regulatory requirements on business trusts, which it has considered to be more high risk. Business trusts are a form of collective investment set up as a trust structure. It is a hybrid bearing elements of both companies and trusts. Under the Business Trusts Act, measures that seek to safeguard investors rights by promoting transparency and establishing the duties of trustees and directors are in place. These include a public registers of beneficiaries and trustee-managers.481

Scottish Law Commission Discussion Paper on the Nature and the Constitution of Trusts (SLC DP133, 2006) at 38.

Requirements of Writing (Scotland) Act 1995, s 1(2)(a)(iii).

Scottish Law Commission, above n 466, at 40.

Ibid, at 41.

Australian Tax Office < www.ato.gov.au >.

For instance, in Victoria A$200 in stamp duty must be paid when a trust is settled < www.sro.vic.gov.au >.

FATF Third Mutual Evaluation on Anti-Money Laundering and Combating the Financing of Terrorism: Canada (FATF/OECD, 2008) < www.fatf-gafi.org > at 251−253.

FATF Third Mutual Evaluation on Anti-Money Laundering and Combating the Financing of Terrorism: United Kingdom (FATF/OECD, 2007) < www.fatf-gafi.org > at 238.

Society of Trust and Estate Practitioners Trust Reporting Systems – An International Comparison (STEP, 2010) at 11.

FATF Third Mutual Evaluation on Anti-Money Laundering and Combating the Financing of Terrorism: United States of America (FATF/OECD, 2006) < www.fatf-gafi.org > at 237 and 239.

Caribbean FATF Mutual Evaluation/Detailed Assessment Report Anti-Money Laundering and Combating the Financing of Terrorism – Cayman Islands, Ministerial Report (CFATF, 2007) < www.cfatf-gafic.org > at 129.

Ibid.

International Monetary Fund Jersey: Financial Sector Assessment Program Update – Detailed Assessment of Observance of AML/CFT (IMF, 2009) < www.imf.org > at 178−179.

FATF Mutual Evaluation Second Follow-Up Report: Anti-Money Laundering and Combating the Financing of Terrorism – Singapore (FATF/OECD, 2011) < www.fatf-gafi.org > at 20.

Ibid, at 22.

Ibid, at 20.