In this episode, we break down the EU’s crackdown on Russian-linked trusts — now widely referred to as “zombie trusts” — following amendments to Article 5m of Council Regulation (EU) 833/2014. These rules have rendered many existing structures legally unserviceable and have effectively shut the door to new trust formation involving Russian nationals or entities.
Key Points Covered:
1. What Article 5m Now Prohibits
Under the amended regulation, EU persons and service providers are barred from registering, hosting, or managing trusts where any of the following are involved:
- A Russian national or Russia resident
- A Russian legal entity
- Any entity owned (over 50%) by such persons
- Any entity controlled by such persons
- Anyone acting on behalf of the above
This covers both natural persons and corporate structures, making the rule extremely broad.
2. Ban on Trust Services
EU persons cannot:
- Act as trustee, nominee shareholder, director, secretary, or similar
- Register a trust
- Provide a registered office, business address, administrative address, or management services
For many existing structures, this has created “zombie trusts” — trusts that still legally exist but cannot be administered or serviced inside the EU.
3. What Counts as a “Similar Legal Arrangement”?
The EU provides no unified definition, but any structure with:
- A fiduciary relationship
- Separation of legal vs. beneficial ownership
…may fall under the same restriction.
Guidance comes from:
- AML Directive (EU) 2015/849
- Commission reports on trust-equivalent arrangements
Importantly, Article 5m’s scope is wider than the AML definition — capturing more structures, more situations, and more service providers.
4. Practical Effects on Russian Clients
- New trusts cannot be registered.
- Existing trusts cannot receive ongoing service (trustee, office address, administration).
- Many trusts are now effectively frozen unless moved outside the EU.
- Professional trustees in the EU are legally obligated to exit these relationships, often abruptly.
5. Why the Term “Zombie Trusts”?
These structures:
- Still exist legally
- Cannot operate
- Cannot be dissolved or restructured...
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