UBO LAWS AND TRUSTS

Trusts are essential to the operation of national and international commerce. UBO laws around the world are destabilising the use of trusts.

THE UBO LAWS

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All EU and EEA Member States have to implement the UBO registration ultimately by 10 January 2020. This obligation stems from the fourth and fifth anti-money laundering directives (AMLD4 and AMLD5 respectively).

This provides a helpful guide as to which States have established UBO regimes.

The UBO legal regime also exists under the US Corporate Transparency Act 2024. Even offshore jurisdictions like Belize have enacted UBO laws.

Belgium provides a classic example of UBO laws in operation.

The UBO register (‘Ultimate Beneficial Owners’) registers all beneficial owners of companies, (international) non-profit associations, foundations, trusts, fiduciaries and all similar legal arrangements. The beneficial owners of an entity are all natural persons or intermediary entities that own or control the entity in whole or in part.

Since 2018, the aforementioned entities are required by law to register their beneficial owners (‘UBOs’) within 30 days of their incorporation and to confirm this information annually. This requirement enhances the transparency and credibility of the entity towards its partners. It also helps fight money laundering and terrorist financing.

A TERRORIST REGISTER

Company Registry machinery for identifying owners had for over a century been sufficient to allow the world’s economies to function domestically and internationally.

The UBO project was naïve and performative. It was always obvious that actual terrorists and high level criminals were not going to put their names down on any UBO register, anywhere.

UBOs therefore simply placed a useless extra burden on corporates.

TRUSTS DO NOT HAVE AN OWNER

The nonsensical basis of UBO laws is most obvious in dealing with trusts. The very nature of a trust (other than a bare or simple trust) is that it does not have an “owner”.

There is no ultimate owner of:

· A discretionary trust: whether commercial or for a family

· A charitable trust

Yet UBO registration laws require that trusts around the world have to pretend that there is an ultimate owner.

That UBO registration pretense is then being used by creditors and tax authorities to contend that the UBO registered person is the ultimate owner.

UNCLE SAM STIRS

The new US administration under Trump has taken note. As at March 2, 2025:

Treasury Department Announces Suspension of Enforcement of Corporate Transparency Act Against U.S. Citizens and Domestic Reporting Companies

The Treasury Department is announcing today that, with respect to the Corporate Transparency Act, not only will it not enforce any penalties or fines associated with the beneficial ownership information reporting rule under the existing regulatory deadlines, but it will further not enforce any penalties or fines against U.S. citizens or domestic reporting companies or their beneficial owners after the forthcoming rule changes take effect either.

The Treasury Department will further be issuing a proposed rulemaking that will narrow the scope of the rule to foreign reporting companies only. Treasury takes this step in the interest of supporting hard-working American taxpayers and small businesses and ensuring that the rule is appropriately tailored to advance the public interest.

“This is a victory for common sense”

said U.S. Secretary of the Treasury Scott Bessent. “Today’s action is part of President Trump’s bold agenda to unleash American prosperity by reining in burdensome regulations, in particular for small businesses that are the backbone of the American economy.”

All entities created in the United States — including those previously known as “domestic reporting companies” — and their beneficial owners are now exempt from the requirement to report beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN) under the Corporate Transparency Act (CTA).

FinCEN published an interim final rule on March 26, 2025, that revised the definition of “reporting company” in its regulations implementing the CTA to mean only those entities formed under the law of a foreign country that have registered to do business in any U.S. State or tribal jurisdiction by the filing of a document with a secretary of state or similar office (formerly known as “foreign reporting companies”). FinCEN also formally exempted entities previously known as “domestic reporting companies” from the CTA’s reporting requirements.

Reporting companies now also do not need to report the BOI of any U.S. persons, and U.S. persons are exempt from having to provide BOI with respect to any reporting company for which they are a beneficial owner.

Foreign entities that meet the new definition of a “reporting company” and do not qualify for an exemption from the reporting requirements are required to file with FinCEN under new deadlines:

• Reporting companies registered to do business in the United States before March 26, 2025, must file BOI reports by April 25, 2025.
• Reporting companies registered to do business in the United States on or after March 26, 2025, have 30 calendar days to file an initial BOI report after receiving notice that their registration is effective.

The guidance issued below has not yet been fully updated to account for this new interim final rule. Thus, any guidance here indicating that U.S companies, or their beneficial owners, must report BOI to FinCEN; that BOI must be reported for U.S. persons; or that reporting companies must report BOI before April 25, 2025, should be disregarded.

Now the rest of the world’s jurisdictions can hurry and catch up.