Solicitors warned about AML shift on nominees
Solicitors have been warned about a change of practice in relation to the use of nominee companies.
Pinsent Masons Ireland LLP partner Neil Keenan told the Business Law Committee’s 2025 conference last week (5 November) that nominee companies were often used in employee and executive share schemes.
Legislation introduced to transpose the Third EU directive on anti-money-laundering (AML), however, (Directive 2005/60/EC) had introduced new requirements for providers of trust and company services (TCSPs).
Section 87(1) of the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 makes it an offence to carry on a TCSP business without authorisation.
‘Change in practice’
Keenan told the conference that the Department of Justice had expressed a view to a member of the profession that anyone acting or arranging for another person to act as a nominee shareholder was a TCSP under the 2010 act and should be duly authorised as such.
He pointed out that many historic company schemes had not been previously regulated in this way, describing the shift as “not a change in law, but a change in AML practice which does evolve”.
The solicitor said that the nominee company’s only function in employee and executive schemes was administrative, and it held no assets, liabilities, or revenues. The advantages of such a system included privacy, ease of administration and lower costs.
Opinion
The conference heard that the Law Society’s Business Law Committee had sought the opinion of a senior counsel (SC) on the issue.
The SC said that there was an argument that nominee companies were not a business, due to the fact that they do not get paid, but pointed to case law that suggested that activities even if not remunerated can be deemed to be conducting a business.
The SC also found that, while the risk of money-laundering was “remote” in such cases, that did not mean that they fell outside AML requirements.
The conclusion was that, while there was an arguable position that nominee companies were not a business under the AML legislation, there was a risk that the Department of Justice may take a different view.
Practice note
Keenan said that the Law Society had provided the department with the opinion but had received a “very adamant” response confirming their view that such nominees do fall within the definition of TCSPs but that each application for authorisation would be considered on its individual facts.
It is therefore necessary, Keenan said, to consider the specific facts of each case when advising clients and consider with clients whether or not to use a nominee structure, use a regulated TCSP, make an application themselves to be authorised as TCSPs, or determine whether a current structure could be maintained in light of the department’s interpretation.
The Law Society has published a practice note on the issue in the November issue of the Gazette.