Regulation, Regulation, Regulation

The Growing Challenge of Regulation

For professionals in the trust and company services sector, regulation is no longer confined to the familiar “know your customer” checks. It has expanded into a complex web of requirements that affect every aspect of how trustees and service providers operate.

The pace of change is relentless. Rules evolve across jurisdictions, and trust or company service providers (TCSPs) must dedicate significant time and resources to remain compliant.

Why Regulation Matters

Regulation is designed to protect societies and jurisdictions. While perfection is unattainable, proportionality is key. Too much regulation risks stifling innovation and respect for the law, while too little leaves gaps that can be exploited.

As Winston Churchill once warned: “If you make 10,000 regulations you destroy all respect for the law.” Hillary Clinton echoed this balance: “There’s nothing magic about regulations, too much is bad, too little is bad.” [1]

Two Dimensions of Trust Regulation

1. Regulation of trustees themselves [2]

This includes requirements for anyone wishing to act as a trustee or provide trustee services. Examples range from “fit and proper” tests and minimum capital requirements for corporate trustees, to cybersecurity and recruitment policies.

Consumer protection also plays a role. In the Cayman Islands, for instance, trust companies must adhere to strict marketing conduct rules, ensuring integrity and honesty in all communications. Guernsey recently updated its guidance on private trust companies, further tightening standards.

2. Regulation of specific trusts

Since trusts are legal relationships rather than entities [3], regulation of a trust is effectively regulation of its trustee. Trustees must manage trust property in line with evolving rules, including those governing beneficial ownership and reporting obligations.

Beneficial Ownership: Expanding Definitions

Anti-money laundering and “know your customer” rules have long been part of the trust landscape. But the concept of beneficial ownership has broadened significantly. It now includes individuals who may not hold ownership in the traditional sense, such as protectors or classes of beneficiaries.

Recent developments illustrate this trend:

• Singapore (June 2025): Expanded the definition of “trust relevant party” to include protectors and beneficiaries. [4]
• British Virgin Islands (July 2025): Exempted companies owned by regulated trustees from filing beneficial ownership information [5], but introduced a trust register in 2024. [6]
• European Union (Regulation (EU) 2024/1624): Harmonised anti-money laundering rules, increasing transparency for trusts and other arrangements. [7]

Trustees must now navigate multiple registers and definitions, often across different jurisdictions.

Statutory and Permissive Regulation

Trust statutes themselves can impose obligations. [8] For example:

• Jersey and Hong Kong prohibit trustees from excluding liability for gross negligence.
• Cayman Islands require special trust trustees to maintain local connections.

Conversely, regulation can be permissive. Bermuda is considering allowing trustees to factor in environmental, social, and governance (ESG) concerns when making investment decisions, without breaching fiduciary duties. [9]

Structures Owned by Trustees

Trustees must also manage regulatory obligations for structures they oversee:

• Economic substance rules: While trustees are often exempt, underlying companies may still need to file nil returns.
• BVI companies: Now required to prepare limited financial reports and disclose director information.
• Base Erosion and Profit Shifting (BEPS) Pillar Two: Applies only to high-value trusts with operating businesses exceeding EUR750 million in revenue.
• Automatic Exchange of Information (FATCA and CRS): Trustees face heavy reporting obligations, which will expand under CRS 2.0 and the Crypto-Asset Reporting Framework.

Sanctions add another layer of complexity, affecting trustees even when their own jurisdiction is not directly targeted.

Looking Ahead

As we move into 2026, trustees must balance compliance with efficiency. Regulation affects costs, staffing, and client choices, but it also safeguards the integrity of the trust industry.

Regulatory issues must be embedded into every policy and procedure. Trustees are not only custodians of assets, they are guardians of transparency, accountability, and trust itself.

[1] AZ Quotes [URL: www.azquotes.com]

[2] And, frequently, other offices such as protector or enforcer.

[3] A trust for purposes invariably has some form of enforcement, which is performed by a person of some form.

[4] Ministry of Law Singapore, ‘Changes to Trustees’ Anti Money Laundering / Countering the Financing of Terrorism Obligations under the Trustees Act 1967’ [URL: https://www.mlaw.gov.sg/files/2025_0613_Guidance_Note_for_FIs__DNFBPs.pdf] and STEP Journal, ‘Singapore to extend AML reporting rules to many more trust-related persons’ [URL: https://www.step.org/industry-news/singapore-extend-aml-reporting-rules-many-more-trust-related-persons]

[5] BVI Business Companies and Limited Partnerships (Beneficial Ownership) (Amendment) Regulations, 2025 [URL:  https://www.bvifsc.vg/sites/default/files/si_no_63_of_2025-bvi_business_companies_and_limited_partnerships_beneficial_ownership_amendment_regulations_2025.pdf]

[6] Virgin Islands Trustee (Amendment) Act, 2024, [URL: https://www.bvifsc.vg/sites/default/files/act_no_16_of_2024-trustee_amendment_act_2024_1.pdf]

[7] There are obligations from the EU Fourth Anti-Money Laundering Directive in 2015, but these are outside the scope of this article.

[8] And other related laws, such as those dealing with perpetuities.

[9] STEP Journal, ‘Trustee act amendments will allow Bermuda trustees to adopt responsible investing’ [URL: https://www.step.org/industry-news/trustee-act-amendments-will-allow-bermuda-trustees-adopt-responsible-investing]