Automatic Exchange of Information – Aligning the Scope of Beneficiaries

As from the 1st September 2022, following completion of the 2022 reporting cycle, the Gibraltar Competent Authority has amended its stance regarding a Reporting Financial Institution’s ability to align the scope of beneficiaries of a trust treated as Controlling Persons of the trust with the scope of beneficiaries of a trust treated as Reportable Persons of a trust that is a Financial Institution.

What this effectively means in practice is that Reporting Financial Institutions are now able to align the scope of reporting beneficiaries of a trust which is classified as Passive (where all beneficiaries would previously have been reported regardless of whether they received benefit) with those of a trust which is a Reporting Financial Institution (where discretionary beneficiaries would only be reported for the years in which they receive benefit).

This is a significant change in stance as it allows greater flexibility in reporting and enables Reporting Financial Institutions to submit what may be considered to be more accurate and relevant reports as discretionary beneficiaries can now only be reported after receiving benefit from the trust regardless of its classification.

The change also allows Reporting Financial Institutions with reporting obligations at different levels within a trust structure to adopt a more consistent approach towards reporting.

Taking the example of a discretionary trust that has been classified as a Reporting Financial Institution which owns an underlying company that has been classified as Passive and holds a relationship with a third party with reporting obligations, such as a bank. Prior to this change there were situations where discretionary beneficiaries who had not received any benefit were not being reported at the top trust level, but were being reported at the underlying company level, creating inconsistency and confusion as to who should be deemed relevant for reporting purposes.

Reporting Financial Institutions in Gibraltar are now able to avoid these scenarios by aligning the scope of reporting and only reporting discretionary beneficiaries for the years in which they receive benefit.

It is important to note that this change in stance does not reduce any existing due diligence requirements which must still be satisfied, and Reporting Financial Institutions who elect to align the scope of reporting must ensure that adequate controls are in place to enable them to identify when a distribution is made and that any notifications which are required to be sent out to any relevant third parties are sent out.

For more information, please contact me on wayne.fortunato@linegroup.gi.