An Urgent Call to the International Trust Industry: Europe’s New AML Rules on Discretionary Trusts Must Be Reconsidered

Europe’s New AML Rules on Discretionary Trusts are Unworkable and Must Be Reconsidered

Trustees, trust lawyers, fiduciary associations, family offices and anyone able to influence European AML policy should read the new AMLA Customer Due Diligence RTS carefully and urgently.

AMLA published its final draft on 1 October 2026 and has submitted it to the European Commission. It is not yet binding law. Once adopted and published in the Official Journal, however, it is proposed to apply six months after entry into force. 

The provisions dealing with discretionary trusts are particularly concerning. If nothing is done NOW we will have to live with this text in Europe for the coming years.

The RTS states in full:
Identification and verification of beneficiaries of discretionary trusts
For the purposes of Article 22(5) of Regulation (EU) 2024/1624, the information obliged entities shall obtain from the trustee of the discretionary trust includes:
(a) details on the objects of a power and default takers, to establish whether it is a class of natural or legal persons or if the natural or legal persons are already identified;
(b) relevant documents to enable the obliged entity to establish that these details are correct and up to date.
To comply with paragraph 1, obliged entities shall take risk-sensitive measures to:
(a) obtain sufficient information about how and in which ways the power of discretion can be exercised by the trustee(s);
(b) establish whether trustees have exercised their power of discretion and appointed one or more beneficiaries from among the objects of a power, or whether the default takers have become the beneficiaries due to the trustees’ failure to exercise their power of discretion.
Obliged entities shall take risk-sensitive measures to ensure that the trustee provides timely updates, including on specific material events.

Read that again, but imagine you are not a trust lawyer.

Imagine you are a real-estate agent, yacht broker, art dealer or other non-financial obliged entity being asked to understand “objects of a power”, “default takers”, whether trustee discretion has been exercised and how potential beneficiaries may change over time.
This is difficult material even for experienced compliance officers. For many ordinary obliged entities, it is close to incomprehensible.
And when compliance staff do not understand a legal concept, the predictable response is often: “Send us everything.”
That is precisely the danger.
The rules reach too far into the internal workings of discretionary trusts

A discretionary trust is discretionary for a reason.
A person who falls within a discretionary class generally has no fixed entitlement to trust property. Trustees may properly change how they exercise their discretion as family circumstances evolve.
Children are born. Marriages occur and end. Beneficiaries become vulnerable. Tax residence changes. Family relationships and business interests change.
The whole purpose of the structure is flexibility.
Yet the RTS pushes obliged entities towards identifying not simply actual beneficiaries, but objects of powers and default takers before any entitlement has crystallised, and towards understanding how the trustee may exercise its discretion.
That materially expands the KYC perimeter and risks creating records on people who may never receive anything at all.

FATF provides a more proportionate model
FATF guidance recognises that discretionary beneficiary classes can be extremely broad and that it may be unnecessary or impractical to identify every possible beneficiary individually at the outset.
A more sensible approach is to understand the beneficiary class and trustee powers, and then identify the individual properly when that person is actually selected, becomes entitled or otherwise becomes genuinely relevant.
The new EU framework goes further by expressly bringing objects of a power and default takers into the identification exercise before final entitlement.
That may look conceptually tidy in legislation. Operationally, it risks creating large amounts of low-value information.

One practical consequence: requests for letters of wishes
The RTS does not expressly require disclosure of letters of wishes.
But the wording is not clear enough to prevent this becoming a routine KYC request.
An obliged entity must obtain details of the objects of a power, “relevant documents” confirming those details, and sufficient information about how trustee discretion can be exercised.
Where the trust deed defines the beneficiary class broadly, a letter of wishes may be the document that identifies which family members the settlor hopes trustees will consider in practice.
A compliance officer may therefore conclude:
“If I have to establish who the realistic objects are and how the discretion operates, I should ask for the letter of wishes.”
That would be deeply problematic.
A letter of wishes is normally non-binding, private and capable of change. It may contain sensitive family information without creating any legal entitlement to trust property.
The RTS should therefore say expressly that letters of wishes are not automatically required, that trustee certification or appropriately redacted information should normally suffice, and that full disclosure should be reserved for genuinely necessary, risk-sensitive cases.

The wider proportionality problem
Why should a family disclose internal succession planning to a real-estate agent merely because a trust-owned company purchases a property?
Why should a yacht broker need to understand which grandchildren might possibly benefit decades from now?
The closest equivalent would be requiring an individual to provide their will and intended heirs or a company to provide details of possible future board members as part of routine KYC.
That would plainly be excessive.
If these rules are applied literally, trustees may increasingly conclude that allowing trusts to own or transact with European assets has become operationally unworkable.
That would not improve AML effectiveness. It would create more data, more privacy risk, more compliance cost and less focus on actual risk.

This can still be fixed
The European Commission must still adopt the RTS.
Trustee associations, STEP members, lawyers, fiduciaries, banks and family offices should engage now.

The principle should be simpler:

Identify the settlor, trustee, protector and ultimate controllers. Identify the beneficiary class. Understand the trustee’s legal powers. Identify and verify individuals when they are actually appointed, become entitled or otherwise become genuinely relevant. Do not turn possible future beneficiaries and private succession planning into routine KYC information.
Once these rules are embedded across Europe, changing them will be far more difficult.

The time to act is now.

Peter Brigham
Director – Rosemont International