South Africa is a member to the Financial Action Task Force (FATF), which is the global money-laundering and terrorist financing watchdog. In order to align with the global standards, set by the watchdog, the South African government has implemented measures to address its lag in this area. To this end, the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act, No. 22 of 2022 (“the Amendment Act”)was enacted.
The Amendment Act seeks to add more transparency within Trust structures by enforcing obligations to declare Trust ownership. Aligning these measures to other existing legislation ensuring consistency in its application, the Trust Property Control Act, No. 57 of 1988 (“the Trust Act”) has been amended to accommodate for these changes.
The Trust Act introduces the concept of a “beneficial owner” and also imposes a requirement on trustees to keep a record of beneficial owners, lodge a register with the Master’s Office and record all details as prescribed in the Trust Act.
What is a beneficial owner?
The Trust Act defines a beneficial owner as:
- A natural person who, directly or indirectly, owns the trust.
- A natural person who exercises effective control of the administration of the trust in pursuant to the terms of the trust deed.
- Each founder of the trust
- Each trustee of the trust
- Each beneficiary referred to by name in the trust instrument or other founding instrument in terms of which the trust is created in its attempt to ensure transparency, the Trust Act dictates that the beneficial owner is always a natural person.
In the event of a legal person (e.g. a company) having ownership, the Trust specifies that the trustee must establish who the natural persons are that ultimately have effective control or are the owners of that entity.
Beneficial owner includes the founder of the trust, the trustees and the beneficiaries as stipulated in the trust instrument.
What is contained in the information that must be recorded?
According to the Trust Act, the trustee must record a list of clearly indicated information including data relating to the individual’s citizenship, tax circumstances, personal details etc.
It is also the responsibility of the trustee to lodge the prescribed information on the beneficial owners of the trust with the Master’s Office. The trustee is compelled to ensure that this information is kept up to date, and any changes that take place must be updated with the Master’s Office accordingly.
Who are “accountable institutions”?
The Trust Act further identifies “accountable institutions” in S11(1)(e) as agents a trustee uses to perform any of the trustee’s functions in relation to trust property; and renders services to the trustee to carry out functions relative to the trust property. “Accountable institution” is further defined in Schedule 1 of the Financial Intelligence Centre Act 38 of 2001.
What are the penalties for non-compliance?
Trustees found non-compliant with these regulations may face fines of up to R10million or in certain instances, imprisonment for a period of up to 5 years. In addition to that, the Master of the High Court or the Financial Intelligence Centre may impose additional penalties on a case-by-case assessment.
What are next steps for Trustees?
Trustees must ensure that all necessary information, as prescribed, has been collected and a registry created, the registry must be submitted to the Master’s Office and all information must be regularly updated. This includes recording any accountable institutions.
When is the registration of the beneficial ownership requirement due?
The deadline for the submission and lodgement of this register is due on the 15th of November 2024. If you have not yet ensured that your Employee Trusts, Ownership Trusts, Broad-Based Trusts or Development Trusts are aligned and up to date, then please reach out so that we can assist you in ensuring that this information is captured correctly, and lodged, as required.
This article is intended to guide and advise on legal requirements relating to trust management and is not intended to serve as official legal advice.
Zainab Sarang
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