MANY trust in God but where money is concerned a bank is safer, and, when settled by trust deed, as discrete as a prayer.

That is why millions use the City of London and English trusts to plan their finances. The sophistication and adaptability of the English trust has created an industry and made London a centre for managing other people’s money.

Unfortunately, the trustee can also provide discretion for a cast of (more) dubious characters. Tax evaders, drug barons, money launderers and, some would have us believe, terrorists find these legal arrangements useful. Trusts are amoral, the duties of the trustee are to act not saintly but discretely, and in the financial interest of the beneficiaries. That means keeping your beneficiaries out of the eye of authorities, such as the taxman and anyone else interested in prying into their affairs.

Not surprisingly, a lot of people have it in for trusts and the secrecy they provide. A host of regulations seeks to throw light into dark corners, forcing “know your client” rules not just on bankers, lawyers and trustees but on estate agents and casino operators, too. The European Union is now debating the Third Money Laundering Directive and should you fall into one of the occupations listed immediately above, you should feel a bit nervous.

Draft article 19 of the directive requires that you rat on your client. You must blow the whistle, not just if you know your client to be a money-launderer and not just if you have reasonable grounds to believe he might be. Under the Third Directive you must shop him if you suspect something.

This is dynamite for any profession in the business of dealing with a client’s money, because it transforms a relationship of trust into one of suspicion. It imposes a duty on you to know your client and what he is up to.

If you wonder why your client is creating a Panamanian company, you will be required to find out. Should you insist that he identify his associates? If his response is a bit vague, at what point are you obliged to tip off the police?

You might think the discomfort of lawyers is trivial when the prize is capturing drug barons and terrorists. But these regulations have little to do with catching crooks. They are about shifting responsibility from government to the private sector.

Not only does the Third Directive enjoin professionals to moonlight as spooks, but it imposes the obligation on institutions to track and monitor the politically corrupt, worldwide. The directive requires banks and professionals to identify “politically exposed persons (PEP)” and verify their bona fides. PEP is defined as anyone who is or was entrusted with a prominent public function, his close family and close associates.

The banks are worried; this is no longer a matter of keeping a list of dodgy dictators but a major forensic intelligence job, a task that might test the resources of MI6. Indeed, under the Third Directive’s strictures, Peter Mandelson, the new European Union Trade Commissioner, would be subject to close questioning were he to seek to open a Brussels bank account.

And it will not stop money- launderers. Sani Abacha, the late Nigerian dictator, did not deposit his bag of swag in London banks under his own name. The purpose of this directive is not to fight crime but to deflect further embarrassment — to shift blame from government and, above all, to mollify the rednecked regulators in Washington, the source of the hysteria over terrorist financing.

We know this is a sham because there is a simple solution to the problem of money-laundering: the abolition of secrecy. Why not make beneficial ownership a matter of public record? Let us require the Registrar of Companies to reveal every true shareholder behind a nominee name.

And let us then kill off the City of London. Britain is rich because the City is trusted to launder its linen daily. London’s financial reputation is as good as the crispness of a banker’s white cuffs and we are all tainted by his success.

French meddling will fell EADS

ROBERT ZOELLICK, the US Trade Representative, is wasting his time pursuing Airbus subsidies in the World Trade Organisation. The apparatus holding up EADS, Europe’s largest aerospace company, will soon come clattering to the ground, through the ambitions of various people and nations.

In Paris, there is finally recognition of the damage being caused by the tug-of-war with Germany over control of this complex hydra-headed entity.Paris is obsessed with turning EADS into another national champion, to sit beside EDF in power, Sanofi in pharmaceuticals and Total in oil and gas.

There is some merit in this. Airbus is as good as French, its operations are focused on Toulouse but the critical issue is not its location but government control. Mr Zoellick’s concern about subsidies is not far removed from DaimlerChrysler’s anxiety about France’s shareholding in an EADS enlarged by a bid for Thales, the French electronics firm. If the French meddled less in the private sector, we would learn to love its national champions more.

carl.mortished@thetimes.co.uk

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