Swedish Trust Companies – The Legal Concept

We would like to elaborate somewhat on the trust concept and how it relates to a jurisdiction like Sweden.

Let us start by using another country as an example. Switzerland is by most standards of the leading offshore trust management jurisdiction in the world. You have thousands of trustees (trust companies/fiduciaries) managing wealth held in trust, for clients worldwide. Almost every bank (and there are many) also has a trust division. Yet, there is no such thing as a Swiss Trust. It simply does not exist in Swiss law (although one has been proposed). Switzerland is a civil law jurisdiction (like Sweden, the Netherlands and others) and as such does not have trust laws. That does not mean trustees cannot operate from there, manage assets from there (whether the trust assets are held in Switzerland or elsewhere). It simply means the actual trust deed is governed by another jurisdiction, often an offshore common law tax haven with no requirement to register each trust created. Even though there is no trust law in Switzerland a Swiss professional trustee needs to be registered with a Self Regulated Organisation (SRO), be licensed as an asset manager/fiduciary with the Swiss Financial Market Supervisory Authority (FINMA) and comply with AML/CFT regulations. This is rather cumbersome in Switzerland compared to some other jurisdictional options with similar benefits and recognition (think Sweden). Switzerland would require local employees and management with documented financial services experience, substantial paid up capital, local physical presence etc etc. There are no such requirements for Swedish Trust Companies (Trustees).

So, that brings us back to Sweden. Just as Switzerland, Sweden is a civil law jurisdiction without trust laws. There is no such thing as a Swedish Trust, just as there is no such thing as a Swiss Trust. However, the activity of Trust Management is regulated under AML/CFT laws. This is because AML laws are based on EU directives and such capture Trust Management as a regulated activity. To manage trusts professionally using a Swedish company (the trust company) requires special registration as a regulated provider and compliance with AML/CFT regulations. This is less cumbersome to obtain in Sweden than in Switzerland, but yet you get a registration showing that you are registered for Trust Management activities and that you have a supervisory authority in Sweden (EU) for AML/CFT purposes.

The governing law of the actual trust instrument will not be Sweden (since again, there is no such thing as a Swedish Trust). It could be any Trust jurisdiction, typically a common law tax haven, such as Jersey. This is what makes the Trust Company valuable, the fact that it is hardly regulated, yet regulated enough so you can show banks and other counterparties that you are AML compliant, not just a “exempt” or unregulated entity holding client funds.

So you can act as trustee in a trust governed by any jurisdiction, unless of course that jurisdiction allows for local trustees only (unusual). Choosing a jurisdiction for a trust is usually as easy as stating the name of the jurisdiction that should govern the trust in the trust instrument (deed). According to the Hague Convention on the Law applicable to Trusts and their Recognition ( https://www.hcch.net/en/instruments/conventions/full-text/?cid=59 ), which is the global standard for dealing with international trusts, Chapter II – Applicable Law, Article 6, reads as follows:

“A trust shall be governed by the law chosen by the settlor. The choice must be expressed or be implied in the terms of the instrument creating or the writing evidencing the trust..”

So the governing law is the one stated in the deed (the trust instrument). You simply execute a trust deed every time you create a new trust account. So again, you have to remember that the trustee is one thing, in this case a professional asset manager, trustee, situated in Sweden and governed by Swedish Company Laws and AML laws, and the trust instrument, the actual trust, which can and should be governed by the jurisdiction of your choice, is something else. The Trust is merely a contract, an instrument, entered by the relevant parties (settlor/trustor, trustee) not a legal entity or person as such in itself, as opposed to the Trustee, which is a Swedish legal corporate body governed by Swedish laws.

Trust assets can be located anywhere, including in Sweden where the Trustee is, or anywhere else in the world. The location of assets does not stipulate which law the trust should be governed by. Having said that, the Hague Convention sets out that if no law has been chosen in the trust instrument, an assessment will be made based on the following considerations (Chapter 2 – Article 7):

a) the place of administration of the trust designated by the settlor;
b) the situs of the assets of the trust;
c) the place of residence or business of the trustee;
d) the objects of the trust and the places where they are to be fulfilled.

We hope that this clarifies that you can operate as a Trustee with your Swedish Trust Company and that you need to comply with AML/CFT regulations. As Trustee you should obviously be focused on managing assets, whether these are securities, cash, diamonds, cryptocurrency, real estate or anything else that can be legally owned and thus also transferred to be managed in a Trust. In the course of operating such a business you will naturally also send and receive payments on behalf of customers holding trust accounts with your institution. However, it is important that payments do not become a core business since you would then cross lines triggering the needs for other licensing, such as Electronic Money or Payment Institution regulations. By partnering with prepaid card program providers, Banking/EMI clearing institutions etc you can in practice offer a very wide range of financial services, but it is important that the Trust Company itself is not purporting to be a bank or payment institution. You will need relationships with banks and other payment clearing providers just like any other business, in order to send, receive and hold client funds. You could also consider adding a Money Service Business (MSB) to your company structure in order to widen your range of permissible activities. Please contact us for further information. We are happy to answer any questions you may have.

© 2024 DX BANK LTD - All Rights Reserved. DX TRUST KB is a AML/CFT regulated Trust Company registered in Sweden with registration number 969798-4046. DX BANK LTD is a Statutory Trust registered in Connecticut with Authoritative Legal Entity Identifier (ALEI) 2662831. DX TRUST KB is the Corporate Trustee of DX BANK LTD. DX MONEY LLC is a Money Service Business (MSB) regulated under the US Bank Secrecy Act and registered with the Financial Crimes Enforcement Network (FINCEN) with registration number 31000228678640. Services are not available in certain jurisdictions or sanctioned countries. Card and payment services are offered in partnership with issuing entities duly licensed and regulated in their respective jurisdictions. Google Play and Google Pay are trademarks of Google Inc. Apple and Apple Pay are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc., registered in the U.S. and other countries. VISA is a trademark of Visa International Services Association. Any other trademarks are the property of their respective owners. The use of these names, logos and brands does not imply endorsement or affiliation. Financial Services are offered in partnership with licensed institutions regulated in their respective jurisdctions.