Trusts offered by commercial banks in Malta : is a case of public mistrust?

Abstract

The concept of Trusts is based on the principle that a Settlor's asset is legally transferred to a Trustee for the ultimate benefit of the Beneficiary. Locally, this is a new service offered by duly licensed Banks and other specialised entities under the legal framework of 2005. Previous academic research on Trusts is voluminous, although scarce in the local context, thus awareness amongst the public is questioned. This dissertation attempts to fill the literature gap by investigating the extent of mistrust if any, in Trusts. The literature review discusses various types of Trusts, and the claimed benefits are tax avoidance, the preservation of family wealth and business continuity purposes. Scholars highlighted the disadvantage of Trusts serving for money laundering and other criminal intentions. The field research carried out through a Triangulation method, interviewing Banks' and MFSA's officials and the public from a selected sample, revealed that although awareness on Trusts is increasing, the concept of Trusts is far from being popular. Those already using the service trust the system and its legal framework. However, some local professionals can be sceptical because they are afraid of losing business or Trusts have not been part of their studies. The dissertation suggests that in order to increase awareness and trust in the system, the local Regulator should strengthen its efforts to increase competency amongst service providers. Furthermore, Banks should intensify their staff training on this service and launch a promotional campaign to demonstrate the benefits of Trusts to the public.