Can a carefully drafted trust deed still place assets beyond the reach of EU sanctions? After two May rulings from the Court of Justice of the European Union, the answer is increasingly no. Henry Mander and Aki Corsoni-Husain of Harneys unpack the “Italian cases” and the broader shift they confirm about practical control vs. what’s on paper.
In May, the Court of Justice of the European Union (CJEU) delivered two sets of judgments concerning trust structures, EU restrictive measures and anti-money laundering (AML) transparency obligations. Together, the rulings, commonly referred to as the “Italian cases,” represent a firm judicial endorsement of the EU’s substance-over-form approach to financial regulation, with significant implications for trustees, fiduciary service providers and compliance professionals across member states.
The first set of decisions — Case C-483/23 and Joined Cases C-428/24 and C-476/24 — addressed the freezing of assets held through trusts under EU sanctions law. Three Italian preliminary references asked whether funds and economic resources held through Bermuda-law trusts could be frozen where those assets were linked indirectly to persons designated under Council Regulation (EU) No 269/2014, adopted in response to Russia’s military aggression against Ukraine. Italian authorities had imposed freezing measures notwithstanding trust instruments that purported to bar transfer to, or control by, the sanctioned individuals.
The CJEU held that the concepts of “belonging to” and “control” within Article 2 of the regulation must be interpreted broadly, encompassing all forms of power or influence exercised over funds and economic resources, including where no formal legal link exists between the assets and the designated person. Assets may be regarded as belonging to, or under the control of, a settlor or beneficiary where those persons retain the ability to use, benefit from or dispose of the resources, or to exert influence over the trustee’s decisions.
The second set of decisions — Joined Cases C-684/24 and C-685/24 — concerned beneficial ownership transparency for Italian trust mandates (mandati fiduciari) under the EU’s 4th Anti-Money Laundering Directive (4AMLD). Italian fiduciary companies had challenged the requirement to disclose beneficial ownership information to members of the public demonstrating a legitimate interest, arguing that trust mandates do not entail a transfer of ownership and should fall outside the directive’s scope. The CJEU confirmed the validity of the access regime, holding it compatible with Articles 7 and 8 of the EU Charter of Fundamental Rights, and that Italy may treat trust mandates as “other types of legal arrangements” having a structure or functions similar to trusts.
Taken together, the judgments demand urgent attention from anyone advising on or administering trust structures with any nexus to EU-regulated persons or activities.
What the rulings signal for EU sanctions & AML regulation
The sanctions ruling is notable for its explicit rejection of formalism. The CJEU made clear that factual indicators of influence, not merely the terms of a trust deed, are determinative. Relevant indicia include relationships between beneficiaries or settlors and the trustee or other power-holders; the allocation of resources to activities primarily benefiting the designated person; the presence of needlessly complex legal structures; a majority shareholding in the trustee held by the beneficiary or settlor; the establishment or reorganization of entities shortly before sanctions were imposed; and close personal relationships between directors of frozen entities and the designated person.
This reasoning is broadly consistent 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. A cross-jurisdictional consensus is forming around effects-based enforcement.
On AML transparency, the CJEU’s confirmation that mandati fiduciari fall within 4AMLD’s regime, despite not involving a formal transfer of ownership, extends the logic of its earlier decision in Sovim v Luxembourg. The court accepted that member states enjoy a margin of discretion in classifying domestic arrangements as “similar to trusts” for transparency purposes, provided the measures remain proportionate and that beneficial owners retain access to interim judicial protection where exemptions are refused.
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Read moreDetailsPractical implications for trustees & compliance teams
These judgments call for concrete operational adjustments. Trustees and fiduciary service providers should consider the following steps as a matter of priority:
- Reassess existing structures: Any trust or fiduciary arrangement with a potential nexus to designated persons requires a fresh factual assessment. The test is no longer whether formal documents insulate the structure from a sanctioned individual but whether that individual retains practical power to use, benefit from or influence decisions over the assets.
- Strengthen due diligence processes: Compliance teams must look beyond documentary ownership to map actual relationships, economic benefit flows and decision-making patterns. Periodic re-assessment is essential, as the indicators the CJEU identified — entity restructuring, close personal relationships with directors and majority shareholdings in trustees — are inherently dynamic.
- Review beneficial ownership records and disclosure protocols: For providers subject to AML obligations in any member state, the transparency ruling reinforces the imperative for robust beneficial ownership identification, record-keeping and disclosure processes, even for arrangements that do not involve a technical transfer of legal title.
- Monitor procedural safeguards: The CJEU accepted that exemption decisions may be taken by non-judicial administrative bodies (such as Italian chambers of commerce), but it emphasized that beneficial owners must retain the right to interim legal protection. Compliance teams should verify that applicable domestic frameworks provide this safeguard in practice.
From formal ownership to practical control
The Italian cases crystallize a broader regulatory trajectory that has been gathering momentum across the EU for several years. Courts, legislators and regulators are moving decisively away from a regime anchored in formal legal ownership, where a trust deed or corporate structure could reliably place assets beyond regulatory reach, toward one in which practical control, influence and economic benefit are the operative concepts.
This shift has profound implications. Structures designed for legitimate estate planning, asset protection or commercial purposes will increasingly be scrutinized not merely for how they read on paper but for how they operate in fact. The question regulators and courts will ask is not “Who holds legal title?” but rather, “Who benefits, who decides and who can influence?”
For the compliance community, the message is clear. Static assessments based on constitutional documents are no longer sufficient. Ongoing monitoring of factual relationships, decision-making patterns and economic flows is now a baseline expectation. Trustees and fiduciary providers who do not adapt their governance and risk frameworks accordingly face not only enforcement risk but the prospect of being unable to demonstrate the lawfulness of their position when challenged.
The Italian cases are not an outlier; they are a signpost. The direction of travel is toward ever-greater scrutiny of substance over form, and the compliance infrastructure around trust and fiduciary structures must evolve to meet it.
Henry Mander
Aki Corsoni-Husain
