The overnight gazetting of the beneficial ownership register regulations is “deplorable”, and trustees who have not submitted their registers are in contravention of the regulations even though, practically, they cannot comply with them, the Fiduciary Institute of Southern Africa (FISA) says.
The Minister of Justice and Correctional Services published the final regulations in the Government Gazette late on Friday, 31 March, and they became effective a few hours later, on 1 April.
The regulations, among other things, set out how trustees must comply with their record-keeping and reporting obligations in respect of beneficial ownership and accountable institutions. These obligations are the result of the amendments to the Trust Property Control Act that came into effect on 1 April.
In terms of the regulations, the Master of the High Court must keep an electronic register on which trustees must upload the details of the beneficial owners of trusts.
“There is no provision for a phasing-in period, which means that all trustees in existing trusts who have not yet supplied their registers to the Master are already in breach of the regulations and therefore potentially subject to the penalty clause in section 19(2) of the Act,” Louis van Vuren, the chief executive of FISA, said.
Section 19(2) renders trustees who do not comply with their beneficial ownership information obligations under section 11A(1) of the Act liable for a fine of up to R10 million and/or imprisonment of up to five years.
“Professional trustees cannot be expected to have their registers for all trusts ready within a few hours of the gazetting of the final text of the regulations,” Van Vuren said.
Register available from 5 April
The electronic register was not available on 1 April, nor was the “interim electronic medium” as provided for in section 3D(2) of the regulations, Van Vuren said.
An electronic register became available on the Master’s web portal, https://icmsweb.justice.gov.za/mastersinformation/, on 5 April.
FISA was informed on 22 March that there would be an interim measure until the online register became available, Van Vuren said. “Our understanding was that this interim facility would be available before the provisions of section 11A(1)(c) of the Act become effective.”
Section 11A(1)(c) of the Trust Property Control Act requires trustees to lodge a register of prescribed information on the beneficial owners of a trust with the Master’s Office.
“The expectation was (the only practical way to implement, in our view) that a process to phase in the keeping and reporting of the information would be introduced, as the final required prescribed information only became known when the regulations were issued on 31 March,” he said.
It will take time for trustees to ensure they have up-to-date information and gather all the information, particularly if a fiduciary practitioner is a trustee of multiple trusts. Not having the most current information is itself a contravention in terms of section 19(2) and is already punishable, Van Vuren said.
A beneficial owner includes the trustees, the founder, and all named beneficiaries.
In terms of section 3C(1) of the regulations, the information that must be recorded about each identified beneficial owner includes their full name, date of birth, nationality, residential address and “other means of contact”.
FISA’s concerns about the amendments remain
The draft regulations were published on 11 January, and the deadline to comment was 13 February.
FISA was not consulted on the draft or final regulations, and, to the best of FISA’s knowledge, neither was any other industry body. FISA submitted comments on the draft regulations by the deadline, Van Vuren said.
He said the final regulations have not allayed any of the concerns FISA raised about the amendments to the Trust Property Control Act, as contained in the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act.
Read: Changes to Trust Property Control Act may be overturned by the courts
“Regulations cannot change legislation, but only give practical effect to it,” he said.
FISA’s concerns with the provisions of the Amendment Act centred on the conflicts it created with the existing provisions of the Act and the fact that the term “beneficial owner” was taken over, “unnecessarily, from the Anglo-American legal systems without any consideration of the fact that it is totally foreign to our trust and property law and contradictory to our property law. The same effect could have been achieved without use of this term,” Van Vuren said.
A further concern with the Amendment Act was the “lazy and sloppy drafting, made worse by extremely sloppy translation”, he said. “Beneficial owner” is translated in the Afrikaans text (the text of the Trust Property Control Act originally signed into law in 1988) as “uiteindelike geregtigde”, which means something totally different, Van Vuren said.
