European citizens could have their private financial affairs exposed on a public register for “all to see”, following the landmark ruling by Members of European Parliament last week, according to Old Mutual Wealth’s Gordon Andrews.
The proposals, part of a bid to combat financial terrorism could affect anyone with a controlling or beneficial interest in a trust or a company. As a result the moves have been criticised by Andrews, who, while agreeing with parts of the proposed legislation, believes that in its current form the proposal could breach data protection and people’s right to privacy.
In a statement following Friday’s announcement, as reported, Andrews, a financial planning expert at Old Mutual Wealth said that he believes that policy makers may face resistance.
Whether the UK will adopt this legislation is not certain due to the UK’s planned exit from the EU and Andrews believes that individual countries should have a the right to decide on whether the use of such registers should be enforced.
“A far better way would be for the register to only be available to tax authorities and governments in each country within the EU,” he said. “My fear is that this will penalise law abiding people who carry out their financial affairs in a sensible, legitimate way.”
If the legislation is adopted in the UK, beneficiaries of trusts, who hold assets with financial institutions in the UK, will have their beneficial interest disclosed on a public register. It is not clear at this stage how much detail will be disclosed, but this could result in fewer people using trusts and could greatly impact the financial affairs of tens of thousands of ordinary people in the UK, added Andrews.
‘Increase in probate fees’
“Trusts are a popular way of helping families plan their finances, and are not just used by the wealthy. Placing a life policy in trust, for example, to help ensure funds are instantly available to beneficiaries on death will become even more important following the increase in probate fees.
“The UK’s financial services industry is already highly regulated, with tight money laundering controls in place. The introduction of the Common Reporting Standards and the sharing of information between countries is adding to transparency and should help in the fight against financial crime,” he said.
Andrews added that while the spirit behind the ruling, and the need to combat financial terrorism is “crucially important”, privacy is also very important to people, not only because of money laundering or tax avoidance, but often as a result of “complex family situations”.
“People want to be able to provide for loved ones on death and through a Trust arrangement they know that this will be dealt with professionally and discretely, without the emotional upset which could arise if the arrangement is made public,” he said.
“It could also put beneficiaries in a vulnerable position, where their future inheritance is made public.”