INTRODUCTION Contributed by: Basil Zirinis and Elizabeth Kubanik, Sullivan & Cromwell LLP
been further fuelled by escalating global trade ten - sions and the looming threat of tariffs. The results of 2024 political elections are sure to further impact the global economy. All of these factors have dramatic consequences for clients and their business interests. Demand for increased transparency and oversight The global drive for transparency continues to be a dramatic force of change in the international private client world. Governments are increasingly focused on cross-border arrangements and structures, and have implemented regulatory schemes that require the exchange of tax-related information. For example, the USA has achieved near-complete international com - pliance with the Foreign Account Tax Compliance Act (FATCA). The Common Reporting Standard (CRS – the recipro - cal automatic information exchange agreement devel - oped by the OECD) has been adopted in over 100 jurisdictions and requires entities (including trusts and foundations) to report information on controlling per - sons. For entities, the controlling persons are gener - ally the individuals who exercise control over the entity or who have a direct or indirect controlling ownership interest in the entity. For a trust, the controlling per - sons are defined to include the settlors, the trustees, the protectors (if any), the beneficiaries or class of beneficiaries, and any other natural persons exercis - ing ultimate effective control over the trust (whether directly or indirectly). Of course, few of these individuals (who may be resi - dent in numerous jurisdictions) actually control a trust, yet the broad reporting requirements create significant compliance burdens and challenges for trustees and financial institutions dealing with trusts. The global reach of the CRS has also made the co-operation of teams of advisers across multiple relevant jurisdic - The European Union has expanded the scope of man - datory disclosure beyond the CRS with the adoption of DAC6, a European Directive requiring tax, account - ing and legal professionals (“intermediaries”) to report their clients’ qualifying cross-border planning arrange - ments. Any cross-border arrangement involving one tions that much more important. Expansion of mandatory disclosure
of a number of specified “hallmarks” is subject to disclosure. The implementation of DAC6 varies by jurisdiction. DAC6 is retroactive to 25 June 2018, which means that intermediaries and their clients may already have substantial reporting obligations under the disclosure regime. In addition to increased emphasis on the automatic exchange of information in programmes that purport to make the information available only to tax and law enforcement authorities, some governments and organisations have moved for even greater transpar - ency, demanding public registers. For instance, in July 2018 the European Parliament and Council adopted the fifth Anti-Money Laundering Directive (5AMLD), which broadened the availability of EU member states’ national registers of ultimate beneficial ownership of trusts. Beginning in 2020, trusts’ beneficial ownership information was required to be made available to: • professionals and institutions subject to anti- money laundering rules, including attorneys and financial institutions acting within the framework of customer due diligence; • persons who can demonstrate a “legitimate interest” in the information, as determined under national law; and • the public, in the case of any trust that holds cer - tain interests in a company outside the EU. However, in November 2022 the European Court of Justice declared this amendment invalid, balancing the public interest objective of the amendment against the right to privacy under the European Union Charter. Information on beneficial ownership must now only be accessible to persons and organisations that are able to demonstrate a “legitimate interest” in such information. In May 2024, the Anti-Money Laundering Regulation and the sixth Anti-Money Laundering Directive were adopted. This new package of laws aims to harmonise existing anti-money laundering rules, providing guid - ance on the type of information that should be held in EU member states’ beneficial ownership registers, and aiming to ensure that those with a “legitimate interest” (very broadly defined to include authorities,
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