South Africa has recently been greylisted by the Financial Action Task Force (FATF), a global financial crime watchdog. This decision was made due to South Africa’s partial compliance with international standards in preventing money laundering, terrorist financing, and proliferation financing. As a result of the greylisting, the Trust Property Control Act underwent necessary amendments. These changes were introduced through the General Laws (Anti-money Laundering and Combating Terrorism Financing) Amendment Act of 2022 and it is crucial for trustees to be aware of the following significant changes:
- Recording and keeping track of the beneficial ownership of the Trust.
- Maintaining an updated trust register that includes information about the beneficial owners.
- Uploading this information onto the Master’s Portal whenever there are changes.
Beneficial owners:
Beneficial owners, as defined by the Act, include the following:
- The person who established the Trust (known as the founder).
- All the trustees of the Trust.
- All the individuals named as beneficiaries in the Trust Deed.
If a named beneficiary is a legal entity (such as a company), the trustees must determine who the natural person(s) are that effectively control that entity or who the owners of the entity are. These individuals would be considered the beneficial owner(s).
Beneficial owners of a company are individuals who directly or indirectly own 5% or more of the company or exercise effective control over it.
Maintaining an updated the trust register:
Trustees are required to establish, document, and maintain accurate and current records of information pertaining to the beneficial owners of trusts.
Directors of companies are also required to create a Beneficial Ownership Register for their companies. This register should be submitted to the Companies and Intellectual Property Commission (CIPC). It must be maintained, and any changes in beneficial ownership should be recorded promptly, or the accuracy of the information should be confirmed annually.
Understanding Penalties, Deadlines, and the Active Legislation:
The effective date for these changes was April 1, 2023, one day after the amendments were published in the Government Gazette. Non-compliance with the regulations could result in fines of up to R10 million or imprisonment for up to 5 years, or both. However, directors have six months to submit the Beneficial Ownership register to the CIPC.
The penalty clause in Section 19(2) of the Trust Property Control Act means that trustees are now at risk of facing the penalties mentioned above. All trustees, not just the independent trustee, and trust service providers should work together to fulfill these demanding obligations.
The South African Revenue Service (SARS) has also issued a draft notice requiring trustees to submit an IT3(t) by September 31, 2023. This IT3(t) should include any amounts received by beneficiaries of a Trust, helping SARS pre-populate beneficiary tax returns.
Trustees need to be actively involved in trust administration to comply with these obligations and ensure adherence to the regulations.
We would like to encourage all trustees to give prompt attention to this matter. If you require any assistance or have any questions, please do not hesitate to reach out to our office.
