The Trust Property Control Act, a key piece of legislation governing South Africa’s trusts, recently underwent a substantial transformation with the passage of the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act. This regulatory overhaul was aimed at strengthening the country’s trust governance, a direct response to its greylisting status, and has significant implications for trustees, especially those managing family trusts.
Expansion of the term “beneficial owner”
One of the primary alterations to the act is the expansion of the term “beneficial owner”. This term now encapsulates individuals with either direct or indirect ownership of the trust property, persons exercising control over the trust’s administration, the trust’s founders, trustees, and named beneficiaries. If a legal entity fulfils these roles, it becomes incumbent on the trustees to identify the natural person(s) owning or controlling such an entity.
Introduction of Section 11A: Record of beneficial ownership
The amendment also introduced Section 11A, mandating trustees to establish and maintain a record of beneficial ownership within the trust. This record, required to be lodged with the Master’s Office, must contain comprehensive information on the beneficial owners, such as full names, date of birth, nationality, official identity details, residential address, contact methods, reasons for beneficial ownership, and the dates of commencement and, if applicable, termination of beneficial ownership. Trustees are also responsible for keeping a certified copy of each beneficial owner’s official identification document.
Accountable institutions and trust property management
Additionally, the trustees are required to record detailed information regarding accountable institutions they engage with for trust property management. These accountable institutions are entities specified in Schedule 1 of the FIC Act.
Authorisation and disqualification of trustees
Another significant amendment is the need for each trustee to receive authorisation from the Master of the High Court before acting in their capacity as a trustee. Grounds for disqualification from acting as a trustee are explicitly defined in the act and a public register of disqualified individuals is to be maintained by the Master.
Financial transparency measures
Furthermore, the act introduces stringent measures to ensure financial transparency. All money received by a trustee must be deposited into a separate trust bank account. When transacting with accountable institutions, trustees must disclose their representative status, thus clarifying their role in relation to the trust property.
Compliance and penalties
Non-compliance with the new regulations carries severe penalties, potentially leading to a fine of up to R10 million, imprisonment for a maximum of five years, or both.
Increased accountability and compliance requirements
The amendments underscore a significant increase in accountability and compliance requirements for trustees. The concept of dormant trusts no longer holds relevance in this new landscape; all trusts must register as taxpayers and remain compliant or face strict scrutiny.
The role of professional assistance and independent trustees
These regulations present a formidable challenge, particularly to independent trustees who must ensure they implement the necessary procedures and maintain up-to-date information as required. It highlights the crucial role of professional assistance and the benefit of independent trustees who can offer valuable guidance and support in ensuring legislative compliance and safeguarding trust assets.
These amendments to the Trust Property Control Act mark a significant evolution in trust governance in South Africa. They mandate a high level of transparency, diligence, and record-keeping from trustees. While navigating this new landscape may seem daunting, engaging expert advice and staying proactive in data gathering and record maintenance will ensure regulatory compliance, thus preserving the integrity of the trust.
This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)