The Role of Trusts in Facilitating Cross-Border Transactions: Legal Functions, Regulatory Fragmentation, and Pathways to Coordination

Abstract

This paper primarily explores the role of trusts in cross-border transactions and the challenges they face. As global economic exchanges deepen, trusts-due to their unique ability to segregate assets, mitigate bankruptcy risks, and enhance the efficiency and security of cross-border transactions-play a significant role not only in private wealth management but also in financing, investment, and digital assets. However, differences in national legal systems create numerous conflicts in trust application. For instance, the concept of "dual ownership" under common law systems often faces non-recognition in non-common law jurisdictions. Simultaneously, stricter scrutiny regarding beneficial owner disclosure and anti-money laundering compliance increases operational costs for trusts. Furthermore, the tension between transparency requirements and privacy protection within trust structures further complicates cross-border compliance. The article concludes by proposing solutions to these challenges, such as promoting the Hague Trust Convention, implementing the latest FATF standards, establishing mutual recognition mechanisms among major jurisdictions, and leveraging new technologies to improve disclosure practices. Overall, as trusts assume greater importance in cross-border finance, bridging institutional gaps across legal systems and reducing compliance burdens are critical to unlocking their full potential.