Trusts, corruption, and money-laundering


Many of us at some time or other may have come across a requirement to specify the beneficiary owner or ultimate beneficiary of some company/société, and banks to have a Know Your Customer (KYC) requirement, it seems, to abide by corporate governance legislation. Non-charitable Trusts on the other hand are structures that seem wholly impervious, secretive and above such governance considerations. There are many valid reasons notaries and legal specialists find Trusts, which operate in Mauritius under the 2001 enacted legislation, very useful instruments for their generally wealthy clients: management of family wealth over generations, tax and succession planning, inheritance tax issues, asset protection and confidentiality for instance.

Those very features of confidentiality and secrecy are also powerful adjuncts in the marketing of the Mauritius financial jurisdiction by talented Assets Managers and other finance professionals, local or expatriate, but this aspect need not concern us unduly here. What may concern the financial and legal community, at a time when other types of structures are subject to good governance scrutiny, is whether Trusts should continue to operate under the cloak of total secrecy, without even a minimum need to register anywhere with any regulatory body. And what if there are good grounds by competent investigative agencies to believe that a trust may have been set up or may be used to hide or protect proceeds of a corrupt or an unlawful activity?

The question is not merely rhetorical for several reasons but obviously as laymen we can only suggest that legal and financial minds pore over the issues in the light of growing worldwide demands for greater transparency, less corruption and better governance.

Trusts were prime vehicles in the notorious Pandora Papers financial scams, while Russian and Ukrainian oligarchs have recently been found to have an avid appetite for trusts and their layers of complex ownership structures to hide massive amounts of luxury properties and assets suspected to have been unlawfully or criminally acquired. Under current local or international trust secrecy laws, authorities rarely even bother to scan or prioritise them in any investigation.

As the country painfully got out of the Financial Action Task Force/Eastern and Southern Africa Anti-Money Laundering Group (FATF/ESAMLAG) grey list and the EU blacklist, we mentioned then that those institutions, including the IMF and the EU, would be upgrading their sights to address the elephant in the room, that is, massive money-laundering generated through high-level corruption, something that took even greater prominence during the pandemic as we know.

In 2022, FATF Ministers highlighted the serious impact of grand and systemic corruption on economies and societies, as well as impeding the effective implementation of the FATF Standards. Encouragingly therefore, both the FATF and the EU are now pressing for countries to apply greater transparency rules and are explicitly telling them that they need at least to set up a national register of Trusts and to record such necessary beneficiary information that would limit the scope for abusing trusts towards corruption and other financial crimes.

As we prepare for that next level, our legal/financial professionals and the concerned Ministry should have started assessing what changes might well be needed to our twenty-year-old trust legislation.

Mauritius Times ePaper Friday 9 June 2023

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