Trustees face harsh penalties if they are found guilty of non-compliance with certain provisions of the amended Trust Property Control Act and the regulations issued in terms of the Act.
The amendments to the Act and the regulations came into effect on 1 April.
One of the purposes of the amendments and the regulations is to ensure transparency regarding the beneficial ownership of trust property and to assist in the investigation of financial crimes.
The new legislation requires trustees and the Master of the High Court to maintain registers of the beneficial owners of trusts and trustees to record the details of accountable institutions.
A “beneficial owner” means a natural person who directly or indirectly ultimately owns the relevant trust property, a natural person who benefits from the trust property, or a natural person who exercises effective control of the administration of the trust arrangements that are established pursuant to a trust instrument.
South Africa, as a member of the Financial Action Task Force, is obliged to ensure that its regulatory regime meets international standards in anti-money-laundering and combating the financing of terrorism, the Ministry of Justice and Correctional Services said in a statement this month.
Here is a summary of trustees’ obligations in terms of the amended Act and the regulations:
Establish and maintain beneficial ownership registers
Section 11A of the Act requires trustees to establish, record and keep an up-to-date record of information relating of the beneficial owner of a trust, as prescribed in regulation 3C.
A beneficial owner of a trust is always a natural person.
Where a founder, a beneficiary, or a trustee of a trust is a legal person, or a person acting on behalf of a partnership or in pursuance of the provisions of a trust, the natural person who directly or indirectly ultimately owns or exercises effective control of that legal person or partnership or the relevant trust property or trust arrangements is the beneficial owner of the trust, and their details must be recorded in the beneficial ownership register of the trust.
Natural persons who do not necessarily fall under the definition of a founder, a trustee, or a beneficiary of a trust, but who directly or indirectly ultimately own the relevant trust property, or who exercise effective control of the administration of the trust arrangements, are also beneficial owners, and their details must be recorded in the beneficial ownership register.
According to regulation 3C, trustees must keep an up-to-date record of the following information in respect of each beneficiary:
- Full names;
- Date of birth;
- Nationality;
- An official identity document number or passport number, indicating the type of document and the country of issue;
- Citizenship;
- Residential address;
- If different from the residential address, the beneficial owner’s address for service of notices;
- Other means of contact;
- If the person is a registered taxpayer in the Republic, the person’s tax number;
- The class or category of beneficial ownership under which the person falls;
- The date on which the person became a beneficial owner of the trust; and
- Where applicable, the date on which the person ceased to be a beneficial owner of the trust.
Lodge beneficial ownership registers with the Master
Trustees are required by section 11A of the Act to lodge the registers of the prescribed information of beneficial owners of trusts with the Master of the High Court.
According to regulation 3D, trustees are required to lodge beneficial ownership registers electronically on a platform that must be provided by the Master.
Make certain disclosures to and record details of accountable institutions
Section 10(2) of the Act requires trustees to disclose to the accountable institutions with which they engage that the relevant transaction or business relationship relates to trust property.
Section 11(1)(e) requires trustees to record the prescribed details of accountable institutions that trustees use as agents to perform their functions or from which trustees obtain services.
Regulation 3B provides that trustees must record the following details of accountable institutions:
- The name of the accountable institution;
- If the accountable institution is a person other than a natural person, the registration details of such person;
- If the accountable institution is a natural person, the official identity document number or passport number of the natural person, indicating the type of document and the country of issue;
- If the trustee used or uses the accountable institution as an agent to perform the trustee’s functions, the nature of the functions;
- If the trustee obtained or obtains services from the accountable institution, the nature of services;
- If the trustee entered a single transaction, as defined in the Financial Intelligence Centre Act (Fica), with the accountable institution, the date on which the single transaction was entered and the nature of the single transaction; and
- If the trustee entered a business relationship as defined in the Fica with the accountable institution, the date on which the business relationship was entered and nature of the business relationship that was entered.
Provide law enforcement agencies with access to beneficial ownership information
Trustees are required to make information contained in the beneficial ownership registers available to the following entities and authorities, which are listed in regulation 3E:
- The National Prosecuting Authority;
- The Independent Police Investigative Directorate;
- The State Security Agency;
- The Intelligence Division of the National Defence Force;
- A Special Investigating Unit;
- An investigative division in a national department listed in Schedule 1 to the Public Service Act that investigates unlawful activity within that national department or in another organ of state;
- The Public Protector;
- The South African Revenue Service;
- The Financial Intelligence Centre;
- An investigative division of the Auditor-General that investigates material irregularities in accordance with the Public Audit Act; and
- A person who is entitled to receive such information in terms of other national legislation.
When non-compliance is an offence
A trustee commits an offence if they fail to:
- Disclose to an accountable institution with which they engage in their capacity as trustees that the relevant transaction or business relationship relates to trust property;
- Record the details of accountable institution prescribed in regulation 3B;
- Establish and record the beneficial ownership information of a trust prescribed in regulation 3C;
- Keep an up-to-date record of the beneficial ownership information prescribed in regulation 3C; or
- Lodge a register of the beneficial ownership information prescribed in regulation 3C with the Master of the High Court.
Penalties for non-compliance
A trustee who is convicted of any of the offences referred to above will be liable for a fine of up to R10 million, or imprisonment for five years, or both.
