South Africa brings new measures for beneficial owners of trusts into force

Amendments to the Trust Property Control Act 1988, which are intended to address the shortcomings in beneficial ownership transparency in South Africa’s regulatory framework, were brought into force on 1 April after the implementing regulations were gazetted on 31 March.

The changes were contained in the General Laws (Anti Money-Laundering and Combating Terrorism Financing) Amendment Act 2022, which was approved last December, and are designed to rectify the deficiencies in South Africa’s trust legislation that were identified by the Financial Action Task Force (FATF).

Financial Action Task Force recommendations

The FATF, an intergovernmental organisation with a mandate to identify jurisdictions with strategic deficiencies in their regimes to combat money laundering and terrorist financing (AML/CFT), placed South Africa on its list of ‘Jurisdictions under Increased Monitoring’ – known as the ‘grey list’ – in February.

When the FATF places a jurisdiction on the grey list, it means the country has committed to resolve swiftly the identified strategic deficiencies in its AML/CFT regime within agreed timeframes and is subject to increased monitoring.

South Africa’s listing followed its slow response to rectify ‘significant shortcomings’ identified by the FATF in its 2021 Mutual Evaluation Report. The report concluded that while South Africa had a solid AML/CFT legal framework, it wasn’t sufficiently active in pursuing money laundering and terrorist financing in line with its risk profile.

In particular, it was required to proactively seek international cooperation, detect and seize illicit cash flows and improve the availability of beneficial ownership information. The authorities needed to make better use of financial intelligence and improve the application of the risk-based approach by obligated entities and supervisors.

Amendments to Trust Property Control Act

The General Laws Amendment Act introduced several changes to the beneficial ownership framework, including by harmonising the concept of a beneficial owner across key pieces of legislation – the Financial Intelligence Centre (FIC) Act, the Companies Act and the Trust Property Control Act.

These Acts now all contain definitions of a beneficial owner that refer to a natural person who directly or indirectly ultimately owns or exercises effective control of a legal person or a trust. This brings the concept of beneficial ownership that is used in the South African legal framework in line with the FATF Recommendations.

The Trust Property Control Act 1988 did not previously provide for reporting on beneficial ownership and therefore had no prescribed penalties for non-compliance. It has now been amended such that a trustee will commit an offence for failing to:

  • Disclose to an accountable institution that they engage with in the capacity of a trustee, 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.
  • Lodge a register of the beneficial ownership information prescribed in regulation 3C with the Master of the High Court.

A trustee who is convicted of any of the offences referred to above will be liable to a fine of up to ZAR10 million, or imprisonment for a period of up to five years, or both.

The Companies & Intellectual Property Commission (CIPC), which administers about 2.1 million active entities, announced in March 2023 that it was planning to establish and implement a beneficial ownership register on the basis of the amendments contained in the General Laws Amendment Act.

The aim of the beneficial ownership register is to establish a repository of natural persons who own or exercise control over legal entities. This will assist law enforcement with information relevant to their investigations into the ultimate owners of an entity.

“The beneficial ownership register, as envisaged by the CIPC in cooperation with other regulators and financial institutions, will enable greater transparency on who the owners are of an entity,” said FIC director Advocate Xolisile Khanyile.

“This will go a long way in preventing abuse of our corporate vehicles for nefarious purposes and assist South Africa to comply with the FATF requirements.”

SARS to record all beneficial owners of newly registered trusts

As of 14 February, the South African Revenue Service (SARS) is also aiming to record all beneficial owners of newly registered trusts. According to SARS, the following types of beneficial owners may be found in the trust environment: founders, trustees, beneficiaries, donors and protectors.

The ultimate beneficial owner must always be a natural person, so where a beneficial owner is identified as a legal entity or arrangement, SARS requires that sufficient detail be provided to clearly identify the ultimate natural person that will benefit from the assets or income of the trust.

Trustees are also now required to submit third-party tax returns in respect of any amount vested in a beneficiary, including net income, capital gains and capital amounts distributed. These returns, containing all prescribed information in respect of the year of assessment of the trust – 1 March to end of February – must be submitted by 30 September of the same year.

Although a ‘beneficial owner’ is not defined in the tax law per se, SARS said a taxpayer should record information on the founder, trustees, donor, protector and beneficiaries of a trust via a new online system, was introduced in mid-February in response to the FATF findings.

SARS said enhancements to the online registration for trusts now allowed foreign trusts and collective investment schemes trusts to register without the mandatory trust registration number. The following trust types are still required to provide a Trust Registration number: Inter vivos Trust, Testamentary Trust, Estate CGT Trust and Special Trust.


Contact Ralph Wichtmann
Get in Touch

Please contact us if you have any questions or queries and your local representative will be in touch with you as soon as possible.