In an effort to address its grey listing status and to ensure that its regulatory environment is geared towards international standards in combating money laundering and financing of terrorism, South Africa has recently amended the Trust Property Control Act, 1988 (Act No. 58 of 1988) ("the TPCA") through the General Laws (Anti Money-Laundering and Combating Terrorism Financing) Amendment Act, 2022 (Act No. 22 of 2022) ("the Amendment Act").
These amendments have been effective as from 1 April 2023 and prescribe, inter alia, the information about a ‘beneficial owner’ as defined in the TPCA, that trustees of mortis causa or inter vivos trusts must now record and keep in a register to be lodged with the Master of the High Court.
Under Section 11A of the TPCA, read together with Regulation 3C of the regulations published to facilitate the implementation of the amendments ("the Regulations"), trustees are now required to establish, record and maintain an up-to-date record of information relating to the beneficial ownership of the trust.
The concept of "beneficial ownership" can be found section 1 of the TPCA, and is defined, in respect of the provisions of a trust instrument, to mean:
- a natural person "…who directly or indirectly ultimately owns the relevant trust property"; or
- a natural person who exercises effective control of the administration of the trust arrangements that are established pursuant to the trust instrument; or
- each founder of the trust; or
- each trustee of the trust; or
- each beneficiary referred to by name in the trust instrument or other founding instrument in terms of which the trust is created;
- if a beneficiary is a legal person, partnership or trust, the natural person controlling that entity.
According to Regulation 3C, the record must contain comprehensive information about the beneficial owners, including each person’s full names, date of birth, nationality, official identity details, residential address, contact methods, category of beneficial ownership, and the dates of commencement and, if applicable, termination of the beneficial ownership. Trustees must also keep a certified copy of each beneficial owner’s official identification document or passport.
Trustees are required by section 11A of the TPCA to lodge their record of this prescribed information of beneficial owners of trusts with the Master of the High Court. According to regulation 3D, the record must be lodged electronically on a platform provided by the Master of the High Court.
In addition, it is now required of trustees to also record the precise details relating to all accountable institutions, such as legal practitioners or financial service providers (a full list of accountable institutions can be found in schedule 1 of the Financial Intelligence Centre Act, 2001) that the trustee employs as an agent to perform the trustee’s functions regarding trust property or from whom the trustee obtains services.
These amendments to the TPCA mark a significant evolution in the governance of trust instruments as they enhance beneficial ownership transparency. However, the reporting obligations placed on trustees will manifestly increase the administrative burden of acting as a trustee. Not only does all this information have to be reported, but its correctness must be updated by the trustee from time to time. In addition, Regulation 3E require that the information must be made available, in principle by the Master but also by a trustee, to any person listed in Regulation 3E(1).
It has become increasingly important for trustees to ensure that all their trust affairs are in order. This is particularly so because the amendments introduce penalties for a trustee’s failure to comply with their reporting obligations. Section 19(2) of the TCPA provides that a trustee who fails to comply with the obligations of reporting, updating and divulging the relevant information referred to in the amendments will commit a criminal offence, which on conviction carries potentially severe penalties, namely a fine of up to R10 Million, imprisonment for a period not exceeding 5 years, or both these sanctions.
It remains to be seen whether these new obligations will be adhered to, on the one hand, and policed and enforced on the other. Nevertheless, trustees should be aware that accepting a nomination as a trustee has become a more onerous responsibility than was previously the position.
