TRUSTS: changes resulting from Law no. 1.559 of 29 February 2024 (Part IV)

In response to the recommendations of the MONEYVAL Committee (Report adopted in October 2022), Law no. 1.559 of 29 February 2024 (Part IV) amended Law no. 214 of 27 February 1936 revising Law no. 207 of 12 July 1935 on trusts, and Sovereign Order n° 10.430 of 29 February 2024 amended Sovereign Order no. 8.635 of 29 April 2021 implementing Law no. 214 (JDM n° 8684 of 1st March 2024).

The amendments relate in particular to information on beneficial owners, basic information, access by the competent authorities to information and documents, accounting obligations, registration in the register of trusts, supervision of the Department of Economic Development (Direction du Développement Économique) and sanctions.

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IN DETAIL

— Updating of the name of the Senior Courts of England and Wales and conditions of application defined by Sovereign Order (art. 2 L. 214).

— Addition of the concept of the trustee's "domicile" (preferred to that of "residence" used by Article 31 of the Anti-Money Laundering Directive (EU) 2015/849, as amended by Directive (EU) 2018/843, the Monaco Code of international private law referring to "domicile") (art. 3 L. 214).

Beneficial owners

— Obligation of the trustee, and of the local representative if the trust is established or domiciled abroad, to obtain, keep and permanently update adequate, accurate and up-to-date information and the corresponding supporting documents on the beneficial owners of trusts established or transferred to Monaco for the purposes of monitoring compliance with the obligations prescribed by Law 214 (the obligations incumbent on the local representative do not exclude those of the trustee, who is legally responsible for the obligations incumbent on them). (art. 6-1 L. 214).

Pursuant to article 6-1 of law no. 214, the trustee and, if he is established or domiciled abroad, his local representative, must obtain, keep and permanently update the following information (art. 2 OS no. 8.635):

1. With regard to the settlors, trustees, beneficiaries and, where applicable, protectors: a) the surname, usual name, nickname or pseudonym, forenames, date and place of birth, nationality(ies), home address of the natural person(s); b) the corporate name, legal form, registered office address, number and place of registration in a public register of the legal person(s). Where the beneficiary or beneficiaries have not yet been designated, the term "beneficiaries" shall be taken to mean the group of persons in whose main interest the trust has been constituted or produces its effects.
2. In respect of any other natural person who ultimately exercises effective control over the trust, the name, surname or pseudonym, forenames, date and place of birth, nationality(ies) and home address.

• 10-year retention period (period aligned with the period of limitation for public prosecution in respect of money laundering and terrorist financing) after the date of cessation of their involvement as trustee or local representative of the trust, in a location in Monaco communicated to the Economic Development Department (Direction du Développement Economique) ;
• Obligation of settlors, protectors, beneficiaries and any other natural person who ultimately exercises effective control over the trust to provide the trustee with the information, any amendments thereto and the relevant supporting documents within 15 days of the request or amendment.
• Trustees established or domiciled abroad are obliged to provide the designated local representative with the said information and any subsequent amendments, together with the relevant supporting documents, within 15 days of the request or amendment.

— Obligation of local representatives of trustees established or domiciled abroad to declare their status and provide, in a timely manner, to the bodies and persons referred to in articles 1 and 2 of Law no. 1.362 the information on beneficial owners when, in their capacity as such, on behalf of a trust or similar legal arrangement, they establish a business relationship or carry out, on an occasional basis, a transaction within the meaning of article 4 of Law no. 1.362 (art. 6-2 L. 214).

Basic information

— Obligation for the trustee, and the trustee's local representative established or domiciled abroad, to obtain, keep and permanently update information relating to the persons and bodies referred to in articles 1 and 2 of law no. 1. 362 of 3 August 2009, as amended, and the persons and bodies governed by foreign law who, if they were established or domiciled in the Principality, would be considered as falling within the scope of these provisions, who provide services or who enter into a business relationship or carry out, on an occasional basis, a transaction (within the meaning of article 4 of Law no. 1.362) with the trust constituted or transferred to Monaco, in order to provide services or advice (new art. 6-1-1 I- L. 214).

The trustee and, if he is established or domiciled abroad, his local representative, are obliged to obtain and keep adequate, accurate and up-to-date information relating to the aforementioned basic information, as well as the corresponding supporting documents, for the entire duration of the provision of services or advice.

The basic information that must be obtained, retained and kept permanently up to date by the trustee and, if he is established or domiciled abroad, his local representative, on the persons and bodies referred to in article 6-1-1 of Law no. 214, is as follows (art. 2-1 OS no. 8.635):

1. surname, forenames, nationality(ies), country of residence, business address and, where applicable, the number and place of registration in a public register, in the case of a natural person ;
   
2. the corporate name or business name, and where applicable, the acronyms used as well as the commercial name or sign used, the address of the registered office, and the number and place of registration in a public register, in the case of a legal entity.

• The trustees and the local representatives of trustees established or domiciled abroad must keep the documents for a period of 10 years after the date on which they cease to be involved in the trust, in a place in Monaco notified to the Economic Development Department.

— Obligation of the persons and bodies referred to in articles 1 and 2 of Law no. 1. 362, and the persons and bodies governed by foreign law which, if they were established or domiciled in the Principality, would be considered as falling within the scope of these provisions, referred to in the first subparagraph of paragraph I, to communicate all the necessary information to the trustee, and if he is established or domiciled abroad to his local representative, as well as any subsequent changes to this information and the supporting documents relating thereto, so that they satisfy the requirements set out in the said paragraph within a period of 30 days. (new art. 6-1-1 II- L. 214).

Authorities' access to information and documents

— Authorities (authorised agents of the Economic Development Department as well as those who have access to information in the register of trusts, including the criminal prosecution authorities) may obtain directly from the trustee or the trustee's local representative established or domiciled abroad all the information they hold on the trust, as well as the corresponding supporting documents. The said authorities may also obtain the necessary information and documents directly from persons occupying a position equivalent to that of the trustee in a legal structure similar to the trust that is to be entered in the register (new art. 6-3 of L. 214).

• The information and documents provided or made accessible pursuant to this provision may be communicated to foreign authorities under the conditions set out in article 51-1 and Chapter VIII of Law no. 1.362, or by means of international mutual legal assistance.

Accounting obligations

— Obligation of the trustee, and of the local representative where the trustee is established or domiciled abroad, to keep the documents relating to the accounting as well as all the corresponding supporting documents (art. 10 L. 214).

Pursuant to article 10 of Law no. 214, trusts are required to draw up an annual balance sheet, showing the endowment funds, and a profit and loss account, within the meaning ofSovereign Order no. 3.167 of 29 January 1946, as amended, and, where applicable, a valuation of the portfolio of securities held. These balance sheets and profit and loss accounts must be submitted to the Economic Development Department within three months of the end of the financial year. With regard to the supporting documents corresponding to the aforementioned accounting documents, management account statements, invoices, bank documents and all documents supporting the accounts and the business must be kept.

• The documents must be kept for a period of 10 years after the date of termination of their involvement as trustee or local representative of the trust, at a location in Monaco notified to the Economic Development Department.

Register of trusts

— Information relating to the trust must be sent to the Department of Economic Development (in place of the Minister of State) for registration and retention in the Register of Trusts (art. 11 L. 214). Registration in the Register of Trusts must be made with the Department of Economic Development within 1 month of the creation or transfer of the trust in the Principality (art. 2-2 OS n° 8.635).

— The application for entry in the register must be sent to the Economic Development Department in writing (art. 12). The form that the application must take, the method of transmission and the list of information and supporting documents that must be attached are determined by Sovereign Order (art. 2-3 and 2-4 OS no. 8.635). The duly completed application for registration must in particular be accompanied by the supporting documents required to establish the accuracy of the information given therein.

— Additional or corrective declarations must also be sent to the Economic Development Department. If any inaccuracies or difficulties are noted, the Directorate will ask the trustee to rectify the situation (under the conditions set out in the new art. 13-1-5) (art. 13 L. 214 ).

— Obligation of the bodies and persons referred to in articles 1 and 2 of law no. 1.362 who submit a request for an extract from the entries in the register of trusts to report any discrepancies to the Economic Development Department within 30 days of the date on which the extract is obtained (art. 13-1 L. 214).

— Redefinition of the conditions under which the competent authorities have access to information in the register of trusts, on the model of the rules applicable to the "register of beneficial owners - companies and EIGs" (art. 13-3 L. 214).

• Information from the register of trusts may be communicated to foreign authorities under the conditions set out in article 51-1 and Chapter VIII of Law no. 1.362, or through international mutual legal assistance.
  

— Consultation of the register of trusts, in accordance with the provisions of the aforementioned article 13-3, allows the implementation of procedures or the taking of decisions concerning offences or breaches of legal provisions other than those provided for in this law and which such consultation would have revealed (art. 13-8 L. 214).

— Access by trustees and local representatives of trustees only to information in the register of trusts that they have declared (art. 13-4 L. 214) under the conditions laid down by Sovereign Order (art. 7 OS n° 8.635).

Supervision of persons required to register trusts

— The Economic Development Department is responsible for supervising and monitoring compliance by trustees and the local representatives of trustees established or domiciled abroad with their obligations and the measures taken to implement them (new art. 13-1-1 L. 214).

— Procedures for documentary and on-site inspections carried out by authorised agents of the Economic Development Department; time slots (between 9 a.m. and 6 p.m. or, outside these hours, when access to the public is authorised or when a professional activity is in progress) during which on-site inspections may be carried out (new articles 13-1-2 and 13-1-3 of L. 214). At the end of an inspection, the authorised officers of the Economic Development Department who took part in the inspection draw up a report after discussions between them, in accordance with the conditions laid down by Sovereign Order (art. 12 OS no. 8.635).

— The Director of Economic Development may provide the authorities with access to the Register with any information or documents relating to the law that he deems useful for the performance of their respective duties (new art. 13-1-4 L. 214).

Penalties

— Introduction of an administrative penalty procedure based on the procedure for punishing breaches of the obligation to register beneficial owners, trade and industry registers and special registers for civil companies (new Articles 13-1-5 and 13-1-6 of L. 214), with proportionate and dissuasive administrative and criminal penalties (Articles 14 to 22 of L. 214).

• The administrative financial penalty procedure is based initially on a financial penalty of up to €10,000, after formal notice has been given to the person concerned, who is given the opportunity to rectify the situation within the time allowed.
  
• If, despite the imposition of the first penalty, the breach or breaches persist, a second administrative fine of up to €200,000 may be imposed.
  
• If the breach persists despite the imposition of this second fine, the person concerned may be liable to criminal prosecution.
  
• The trustee 's directors, partners and shareholders are also liable to administrative penalties because of their personal involvement in the breaches observed.

— Full appeal against penalties imposed by the Director of Economic Development to the Court of First Instance within 2 months of the date of notification (new art. 13-1-7 L. 214).