FINANCE LITIGATION UPDATE – JULY 2022 38 and the Commission's report when assessing whether an arrangement is caught by Article 5m. Neither the fifth or sixth packages of EU sanctions (which introduced and amended Article 5m) contain any reference to AMLD, which might have been expected if the intention was to align the terms. The drafting of the FAQs suggest that a case-by-case assessment of any suspect arrangement will be needed and that, in undertaking that assessment, the Commission's report may be helpful in identifying some of the more common arrangements caught by Article 5m; however, the Commission's report may not cover every such arrangement. 3. Doubt had previously been expressed in the market as to whether distributing trust assets to beneficiaries because of the impact Article 5m would be consistent with the EU sanctions against Russia. However, the FAQs indicate that it may be necessary to bring a trust to an end and "resurface" the trust assets if prohibited services are necessary for the trust's operation, suggesting that the concern that Article 5m seeks to address is that trusts and "similar legal arrangements" may have been used by Russians to store wealth in the EU in a less than transparent way. Note that where a trustee or person in a similar position in a "similar legal arrangement" wishes to take steps to bring the arrangement to an end from 5 July 2022, this will require prior authorisation from the relevant national competent authority. 4. Article 5m(5)(b) provides that national competent authorities may authorise the provision of fiduciary services beyond 5 July 2022, provided that the services providers do not accept from, or make available to, Russian persons6 any funds or economic resources, directly or indirectly, or otherwise provide such persons with any benefit from assets placed in a trust. The Commission suggests one use of this derogation would be to allow the continued operation of a trust or "similar legal arrangement" where there are several beneficiaries including EU persons. However, as highlighted in our previous article, the derogation applies to the provision of fiduciary services only; it does not apply to the provision of management services. 5. As explained in our previous article, the prohibitions on the provision of management services and on the provision of fiduciary services "shall not apply when 6 (a) Russian nationals or natural persons residing in Russia; (b) legal persons, entities or bodies established in Russia; (c) legal persons, entities or bodies whose proprietary rights are directly or indirectly owned for more than 50 % by a natural or legal person, entity or body referred to in points (a) or (b); (d) legal persons, entities or bodies controlled by a natural or legal person, entity or body referred to in points (a), (b) or (c); the trustor or beneficiary is a national of a Member State or a natural person having a temporary or permanent residence permit in a Member State" (Article 5m(4), our emphasis). The FAQs indicate that this exception applies "where a trust or similar legal arrangement has only one trustor or one beneficiary who is a national of a Member State or a natural person having a temporary or permanent residence permit in a Member State" (our emphasis). It is not clear from the drafting of the FAQs whether the Commission's view is that the exception in Article 5m(4) applies only to trusts with: (a) one EU settlor/beneficiary7 (without any other settlors/beneficiaries); (b) one EU settlor/beneficiary (with other non-EU settlors/beneficiaries); or (c) at least one EU settlor/beneficiary (with or without other non-EU settlors/beneficiaries). In any event, the FAQs are difficult to reconcile with the wording of Article 5m(4). If you would like to discuss the impact of the sanctions, then please contact one of our team. Stephen Ashley and Sue Millar (e) a natural or legal person, entity or body acting on behalf or at the direction of a natural or legal person, entity or body referred to in points (a), (b), (c) or (d). 7 That is, a national of an EU Member State or a natural person having a temporary or permanent residence permit in an EU Member State.