In response to South Africa’s greylisting by the Financial Action Task Force earlier this year, Government has brought into effect the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act, No. 22 of 2022 (“the Amendment Act”).
The Amendment Act has introduced new trustee obligations into the existing South African trust law. The changes pertain to the recording and reporting of beneficial ownership of trusts. The aim of this recording is to improve transparency regarding the ownership of trust assets to assist in the combatting of a money laundering and terrorist financing.
The Trust Property Control Act, No. 57 of 1988 (“the TPC Act”) has been amended to include these new trustee obligations.
Section 11A(1) of the TPC Act provides that a trustee of a trust must establish and record the beneficial ownership of the trust; keep a record of the prescribed information relating to the beneficial owners; lodge a register of the prescribed information of the beneficial owners with the Master’s Office; and ensure that the prescribed information is kept up to date.
A “beneficial owner” in respect of a trust is defined in the TPC Act as:
a) a natural person who directly or indirectly ultimately owns the relevant trust property or who exercises effective control of the administration of the trust in accordance with a trust deed;
b) each founder of the trust;
c) each trustee of the trust; and
d) each beneficiary referred to by name in the trust deed or other founding document in terms of which the trust is created.
A ‘beneficial owner’ is always a natural person. In the instance where a legal entity fulfils the role of a beneficial owner, the natural person/s who ultimately benefit/s from the legal entity will need to be recorded as the beneficial owner/s of the trust.
This means that if any of the above categories is a legal person (e.g. a company or a close corporation), the beneficial owner is the natural person who directly or indirectly ultimately owns or exercises effective control of that legal person or the relevant trust property or trust administration.
The Regulations to the TPC Act (“the Regulations”) set out the information that trustees must record relating to each identified beneficial owner of the trust, which includes:
· Full name and surname;
· 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 residential address, the beneficial owner’s address for service of notices;
· 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.
The Regulations further oblige trustees to keep a certified copy of an official identity document or passport of each identified beneficial owner of the trust.
The trustees are also required to keep a copy of the form submitted to the Master for the submission of the beneficial ownership register, as well as the completed register itself, in the trust’s records.
These records must be made available on request to any of the following persons identified in the Regulations:
· The National Prosecuting Authority;
· 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 of the Public Service Act, 1994, having a function by law to investigate 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 having the function by law to investigate material irregularities in accordance with the Public Audit Act, 2004; and
· A person who is entitled to receive such information in terms of other national legislation.
The new reporting requirements are unprecedented in our trust law insofar as they set a new level of transparency, visibility and accountability in relation to those who control and administer trusts and those who ultimately benefit from the distributions of those trusts. Considering the purposes for which the amendments were introduced and the persons who will have access to the information, it is essential that trustees become well-acquainted with the new requirements and ensure that they submit the necessary information timeously.
Please contact our offices if you would like to know more about the new beneficial ownership reporting requirements for trusts.