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FinCrime Institute
Category: Beneficial Ownership

Settlor

Also known as: Grantor, Trustor, Donor, Settlor of a trust
Simply put

A settlor is the person who creates a trust by transferring their assets or property into it. Once the trust is set up, the settlor typically hands legal ownership of those assets to one or more trustees, who manage them for the benefit of the beneficiaries. In some arrangements the settlor may reserve certain rights, such as the ability to amend the trust.

Formal definition

In trust law, the settlor is the party who creates a trust and settles property into it, transferring legal title in the relevant assets to the trustee(s) to be administered for one or more beneficiaries. The settlor generally agrees the provisions of the trust deed and appoints the trustees, and may reserve powers over the trust such as the right to amend its terms, depending on how the arrangement is structured. Terminology varies by jurisdiction: the equivalent party is commonly referred to as a grantor, trustor, or donor in certain contexts. This entry reflects the general trust-law meaning; the settlor's treatment for AML purposes (for example, whether and how the settlor must be identified as part of customer due diligence on a trust) depends on the applicable regime and should be confirmed against the relevant regulation.

Why it matters

The settlor sits at the origin of a trust, and identifying who they are matters because trusts can obscure the connection between a person and the assets they place beyond their direct legal ownership. When a settlor transfers legal title to a trustee, the ultimate source and control of those assets can become harder to trace, which is why trusts feature prominently in discussions of how legal arrangements may be misused to disguise the ownership or origin of funds. For obliged entities, understanding the settlor's role is a starting point for assessing who stands behind a trust that seeks financial services.

Because a settlor may reserve powers over a trust, such as the right to amend its terms or influence its administration, the settlor can remain a relevant party for risk assessment even after legal ownership has passed to the trustees. The degree of retained control varies with how the arrangement is structured, and this variability is precisely why the settlor is not simply a historical figure in the trust's creation. Identifying the settlor helps compliance professionals understand who may still exercise influence over the assets and for whose ultimate benefit the arrangement operates.

Whether and how a settlor must be identified as part of customer due diligence on a trust depends on the applicable regime and should be confirmed against the relevant regulation. Regimes differ in how they treat the parties to a trust for AML purposes, and the settlor's identification requirements are not uniform across jurisdictions. Treating the settlor as automatically equivalent to a beneficial owner, or assuming a single global rule applies, risks misstating the actual obligation.

Who it's relevant to

Compliance officers at obliged entities servicing trusts
When onboarding or servicing a trust, compliance teams may need to understand the settlor's role in the arrangement, including any powers the settlor has reserved. The extent to which the settlor must be identified as part of customer due diligence depends on the applicable regime and should be confirmed against the relevant regulation.
Trust and corporate service providers
Professionals who help establish and administer trusts work directly with settlors, who agree the trust deed and appoint the trustees. Understanding the distinction between the settlor's original transfer of legal title and any powers retained over the trust is central to accurately documenting the arrangement.
Financial intelligence analysts and investigators
Because a settlor transfers legal ownership to trustees while potentially retaining influence, analysts examining trusts benefit from distinguishing the settlor from the trustees and beneficiaries. Recognising the settlor's role helps in mapping who created the arrangement and who may still exercise control, though such mapping does not itself establish wrongdoing.
Legal and risk professionals
Advisers assessing legal arrangements need to account for jurisdictional variation in terminology, where the settlor may be called a grantor, trustor, or donor, and in how the settlor is treated for AML purposes. This entry reflects the general trust-law meaning; specific regulatory treatment should be confirmed against the applicable regime.

Inside Settlor

Definition of Settlor
The person (natural or legal) who establishes a trust by transferring assets into it, thereby creating the trust arrangement and defining its terms, typically through a trust deed or declaration of trust. In some jurisdictions and instruments this role may be referred to as a 'grantor' or 'trustor.'
Role in Trust Structures
The settlor provides the initial trust property and sets out the intentions governing how the trustee is to administer assets for beneficiaries. The settlor's role is generally distinct from that of the trustee (who administers) and the beneficiaries (who benefit), though in some arrangements one person may occupy more than one role.
Beneficial Ownership Relevance
For AML/CFT purposes, the settlor is commonly treated as one of the parties to be identified when establishing the beneficial ownership of a trust. Identifying the settlor supports understanding of who established and funded the arrangement, which is relevant to but not the same as identifying the ultimate beneficial owners who benefit from trust assets.
CDD and Obliged Entity Obligations
Where an obliged entity (such as a trust or company service provider, bank, or other regulated firm) enters into a business relationship involving a trust, customer due diligence typically requires identification of the settlor alongside trustees, protectors, beneficiaries, and any other natural person exercising ultimate control. Exact requirements vary by regime, for example under the EU AML framework, the UK Money Laundering Regulations, and FinCEN rules.
Retained Powers and Control
A settlor may, depending on the trust's terms, retain powers such as the ability to revoke the trust, add or remove beneficiaries, or direct the trustee. Retained control is a factor that may elevate the settlor's significance in a risk assessment, as it can indicate continuing influence over the assets.

Common questions

Answers to the questions practitioners most commonly ask about Settlor.

Is the settlor the same as the trustee?
No. The settlor and the trustee are distinct roles, though in some arrangements one person may occupy more than one position. The settlor is the person who provides the assets and establishes the trust, whereas the trustee is the person or entity holding and administering those assets under the terms of the trust. Conflating the two is a common error in beneficial ownership analysis. In many jurisdictions, AML frameworks require obliged entities to identify each of the parties to a trust separately, including the settlor, trustee(s), protector (if any), beneficiaries, and any other natural person exercising ultimate effective control, rather than treating them as a single role.
Does creating a trust and transferring assets mean the settlor no longer has any relevance for AML purposes?
Not necessarily. While the act of settling assets typically transfers legal ownership to the trustee, the settlor is generally still treated as a relevant party for customer due diligence and beneficial ownership purposes in many jurisdictions. This is because a settlor may retain powers or influence over the arrangement, and identifying the settlor helps establish the source of the assets and the overall control structure. The precise treatment of settlors, and whether they are regarded as beneficial owners, varies by regime and by the specific terms of the trust, so the applicable rules should be confirmed against the relevant regulation.
How should an obliged entity identify and verify the settlor when onboarding a trust?
In many jurisdictions, customer due diligence on a trust generally requires obliged entities to identify the settlor as one of the parties to the arrangement and to verify their identity on a risk-sensitive basis. This typically involves obtaining identifying information for the settlor as a natural person (or, where the settlor is itself a legal entity or arrangement, looking through to the natural persons behind it) alongside identification of the trustee, beneficiaries, and any protector or controlling party. The specific documentation, verification standards, and thresholds depend on the applicable framework and the assessed risk of the relationship, and should be confirmed against the relevant regulation.
What should be done where the settlor is deceased or where multiple settlors exist?
The treatment of a deceased settlor or of arrangements with multiple settlors depends on the applicable regime and the terms of the trust. Where a settlor is deceased, obliged entities may still need to record historical information about who originally settled the assets to understand the source of funds and the structure, even though ongoing verification of that individual may no longer be feasible. Where multiple settlors exist, each may generally need to be identified as a party to the arrangement. Firms should apply a risk-based approach and confirm the specific expectations against the relevant regulation and any supervisory guidance.
How does information about the settlor feed into a risk assessment of the trust relationship?
Information about the settlor is one input among several used to assess the risk profile of a trust relationship. Understanding who settled the assets, the source of those assets, and any powers the settlor may retain can help an obliged entity evaluate factors such as complexity, transparency, and control. This assessment should be considered alongside information on the trustee, beneficiaries, protector, purpose of the trust, and jurisdictional factors. Such measures are intended to help detect, deter, and manage risk rather than to guarantee prevention, and identifying a settlor does not in itself indicate wrongdoing.
Where is settlor information typically recorded for regulatory purposes?
In many jurisdictions, settlor information forms part of the beneficial ownership and party information that obliged entities are expected to collect and retain as part of their customer due diligence records. Some regimes also maintain trust registers or beneficial ownership registers to which certain settlor details may need to be reported. The scope of what must be recorded, retained, or reported, and to whom, varies significantly between regimes, so the specific record-keeping and registration obligations should be confirmed against the applicable regulation.

Common misconceptions

Once the settlor transfers assets into the trust, they have no further relevance and need not be identified.
In many jurisdictions, AML customer due diligence obligations generally require the settlor to be identified as a party to the trust regardless of whether they retain ongoing powers. Where the settlor retains powers such as revocation or the ability to direct the trustee, they may remain highly relevant to a risk assessment. Exact identification requirements should be confirmed against the applicable regulation.
The settlor and the beneficial owner of a trust are the same thing.
The settler is one of several parties potentially relevant to determining beneficial ownership, but the concepts are not identical. Beneficial ownership analysis typically considers settlors, trustees, protectors, beneficiaries, and any other natural person exercising ultimate control. A settlor may or may not be a beneficial owner depending on the structure and the applicable definition, which varies by regime.
Involvement of a settlor, or the use of a trust structure, is itself an indicator of wrongdoing.
Trusts and the settlor role are legitimate legal arrangements used for many lawful purposes. Their presence is not proof of money laundering or any offence. Certain features, such as complex layering of control or a settlor retaining undisclosed powers, may warrant additional scrutiny under a risk-based approach, but such factors are risk indicators to be assessed, not determinations of criminality.

Best practices

Identify and verify the settlor as part of trust-related customer due diligence, in addition to trustees, protectors, and beneficiaries, in line with the requirements of the applicable regime and confirming exact obligations against the relevant regulation.
Assess whether the settlor retains any powers (such as revocation, direction of the trustee, or adding/removing beneficiaries) and factor retained control into the risk assessment of the relationship.
Distinguish clearly in records and analysis between the settlor's role and the identification of ultimate beneficial owners, avoiding treating the two as automatically equivalent.
Apply a risk-based approach to trust structures rather than treating the involvement of a settlor as inherently suspicious, reserving enhanced due diligence for elevated-risk factors.
Document the source of the assets settled into the trust and the settlor's rationale where relevant, and retain supporting evidence to demonstrate the basis for CDD decisions.
Note jurisdictional terminology differences (for example 'grantor' or 'trustor') and confirm the applicable definitions and thresholds under the governing regime before relying on them.