The Court of Justice of the European Union (CJEU) has issued rulings that fundamentally change how your team must evaluate trust structures in the context of EU sanctions and anti-money laundering (AML) compliance. The court has moved away from formal legal ownership as the key factor, emphasizing practical control, influence, and economic benefit in determining whether assets fall under sanctions or disclosure requirements.
The first set of decisions (Case C-483/23 and Joined Cases C-428/24 and C-476/24) dealt with whether funds held through Bermuda-law trusts could be frozen when linked to individuals designated under Council Regulation (EU) No 269/2014, which was adopted in response to Russia's military aggression against Ukraine. Italian authorities had imposed freezing measures despite trust instruments explicitly prohibiting transfer to or control by sanctioned individuals.
The CJEU ruled that "belonging to" and "control" within Article 2 of the regulation must be interpreted broadly. This includes all forms of power or influence over funds and economic resources, even without a formal legal link between the assets and the designated person. Assets may be considered as belonging to a settlor or beneficiary if those individuals can use, benefit from, or dispose of resources, or influence the trustee's decisions.
The second set (Joined Cases C-684/24 and C-685/24) focused on beneficial ownership transparency for Italian trust mandates under the EU's 4th Anti-Money Laundering Directive. The court confirmed that Italy may treat trust mandates as "other types of legal arrangements" similar to trusts, even without a formal transfer of ownership. The access regime requiring disclosure to the public demonstrating legitimate interest was deemed compatible with Articles 7 and 8 of the EU Charter of Fundamental Rights.
Key Findings
Factual indicators trump formal documents. The CJEU identified specific indicators of practical control: relationships between beneficiaries or settlors and the trustee; allocation of resources to activities primarily benefiting the designated person; needlessly complex legal structures; majority shareholding in the trustee held by the beneficiary or settlor; establishment or reorganization of entities shortly before sanctions were imposed; and close personal relationships between directors of frozen entities and the designated person. Your trust deed's language no longer insulates the structure if these indicators are present.
Member states have discretion to expand AML scope. The court accepted that member states may classify domestic arrangements as "similar to trusts" for transparency purposes, even without a formal transfer of ownership. This discretion is broad, provided measures remain proportionate and beneficial owners retain access to interim judicial protection where exemptions are refused. If you're advising on fiduciary arrangements in any member state, expect national regulators to exercise this discretion aggressively.
Cross-jurisdictional consensus is forming. The CJEU's reasoning aligns with the English Court of Appeal's Eurochem judgment of July 2025, which similarly looked beyond formal legal title to assess whether sanctioned persons retained practical control over trust assets. This isn't a regional quirk. Effects-based enforcement is becoming the standard across multiple jurisdictions.
Non-judicial bodies can make exemption decisions. The court accepted that exemption decisions may be taken by administrative bodies such as Italian chambers of commerce, rather than courts. However, it emphasized that beneficial owners must retain the right to interim legal protection. This creates a compliance paradox: faster administrative decisions but heightened procedural risk if your domestic framework doesn't provide adequate judicial review pathways.
What This Means for Your Team
Your existing control assessments are likely inadequate. If you're relying on trust deeds, corporate charters, or other constitutional documents to determine whether assets are subject to sanctions or AML disclosure, you're operating under a framework the CJEU has now explicitly rejected.
The court's emphasis on "needlessly complex legal structures" as an indicator of practical control means that multi-layered arrangements designed for legitimate tax or estate planning purposes will face heightened scrutiny. You'll need to document the commercial rationale for each layer and be prepared to demonstrate that complexity serves a purpose beyond obscuring control.
For trustees and fiduciary service providers, the liability exposure has expanded. You can no longer rely on the four corners of your appointment documents. If Italian authorities, UK regulators, or other EU member state enforcement bodies determine that a beneficiary or settlor retained practical influence, your compliance with the trust instrument's formal terms won't be a defense.
Action Items by Priority
Immediate (within 30 days): Flag all trust and fiduciary arrangements with any nexus to designated persons for fresh factual assessment. Don't wait for a preliminary reference or enforcement action. The CJEU's indicators are clear enough to apply now. Map actual relationships, economic benefit flows, and decision-making patterns. Document who actually influences trustee decisions, regardless of what the trust deed says.
Near-term (60-90 days): Revise your Vendor Risk Profile templates and ongoing monitoring procedures to capture the CJEU's indicators. Add fields for: timing of entity establishment or reorganization relative to sanctions announcements; shareholding relationships between trustees and beneficiaries; personal relationships between directors and designated persons; and allocation of trust resources to activities benefiting specific individuals. These aren't optional data points anymore.
Ongoing: Implement quarterly re-assessment cycles for high-risk structures. The indicators the CJEU identified are inherently dynamic. A restructuring, a new director appointment, or a change in how trust distributions are allocated can shift your compliance posture. Static annual reviews won't catch these changes in time.
Policy update: Revise your beneficial ownership identification procedures to assume that member states will exercise maximum discretion in classifying arrangements as "similar to trusts." If an arrangement involves fiduciary duties or discretionary decision-making over assets, treat it as in-scope for AML transparency obligations unless you have specific legal advice confirming otherwise.
