- It is common knowledge that during February 2023, South Africa was greylisted by the Financial Action Task Force due to deficiencies in its anti-money laundering and terrorist financing regulations.
- To remedy these shortcomings in regulation, the legislature imposed new onerous record keeping and reporting obligations on South African trusts. The regulations took effect from 1 April 2023.
- These changes to the regulation of South African trusts came in the form of an amendment to the Trust Property Control Act, 1988 (“TPCA”).
- In simple terms, Section 11A(1) of the TPCA now obliges trustees to:
4.1. establish and record the beneficial ownership of the trust;
4.2. keep a record of the prescribed information relating to the beneficial owners of the trust;
4.3. lodge a register of the prescribed information on the beneficial owners of the trust with the Master’s Office. In this regard, the Master has implemented an online electronic register; and
4.4. ensure that the information is kept up to date.
- To comply with these obligations, trustees must consider the definition of “Beneficial Owner” in section 1 of the TPCA and the trust deed carefully.
- While these new obligations primarily relate to record keeping in relation to “Beneficial Owners”, trustees would be wise to note that certain old obligations have also been expanded upon – these are:
6.1. Trustees must disclose their position as trustee to any accountable institution with which the trustee engages in that capacity, and must make it known to the accountable institution that the relevant transaction or business relationship relates to trust property [Section 10 (2)]; and
6.2. Trustees shall record the prescribed details relating to accountable institutions which the trustee uses as agents to perform any of the trustee’s functions relating to trust property, and from which the trustee obtains any services in respect of the trustee’s functions relating to trust property [Section 11A(e)].
- The prescribed information that a trustee must record in relation to accountable institutions and beneficial owners is set out in the new regulation 3B and 3C of the TPCA Regulations.
- The list of “Accountable Institutions” can be found in Schedule 1 of the Financial Intelligence Centre Act, 2001 (“FICA”). As a non-exhaustive list, accountable institutions include: attorneys practicing for their own account, advocates, company service providers, estate agents, banks, credit providers, high value goods dealers. This list is long and would require focused consideration by trustees.
- The penalties for non-compliance with these obligations are made onerous by the penalties which attach to them – in that trustees who fail to comply will be committing an offence and are at risk of receiving a maximum fine of R10 million, or imprisonment for a maximum of 5 years, or both.
- Importantly, the amendments do not differentiate between ordinary and independent trustees. It follows that attorneys, accountants and trust service providers who act as independent trustees for clients, are also obliged to comply and would be open to penalties for non-compliance.
- The regulations do not provide for a grace period to ensure compliance and trustees are therefore obliged to take immediate steps toward compliance.
DISCLAIMER:
This publication is intended for general information purposes and does not constitute legal advice or establish any attorney-client relationship with the reader. Specific, tailored legal advice should always be obtained in relation to your situation. Viren and Company does not accept any liability for any losses suffered in connection with your reliance on this publication.
