South Africa requires reporting of the beneficial ownership of trusts
South Africa has introduced a new reporting obligation for trustees to keep up-to-date records of the beneficial ownership of trusts and to submit that information to the Master of the High Court. A Bill to amend the Trust Property Control Act, Act 57 of 1998 (TPCA) was gazetted on 31 March and took effect as of 1 April.
The amendment places responsibility on trustees to record comprehensive data regarding beneficial ownership of trusts. The law defines ‘beneficial ownership’ to include the settlors, trustees, named beneficiaries and any individuals who exercise effective control of any trust.
A ‘beneficial owner’ is always a natural person. In cases where a legal entity fulfils the role of a beneficial owner, the natural person or persons who ultimately benefit from the legal entity must be recorded as the beneficial owners of the trust.
Trustees are required to collect the beneficial ownership data and record it via the online portal of the Master of the High Court. Only trustees are permitted to record the data with the Master of High Court, but they can give authority under a Power of Attorney to a trust administrator to upload the data on their behalf.
Failure to comply with the requirements can result in a penalty of up to R10 million and/or five years’ imprisonment for trustees. Additional sanctions can also be applied by the Master of the High Court or South Africa’s Financial Intelligence Centre.
These legislative changes have been made to bring South Africa into compliance with the recommendations of the Financial Action Task Force (FATF), which ‘grey listed’ South Africa in February.
At that time, South Africa made a high-level political commitment to work with the FATF and the Eastern & Southern Africa Anti-Money Laundering Group (ESAAMLG) to strengthen the effectiveness of its anti-money laundering and countering the financing of terrorism (AML/CFT) regime by:
- Demonstrating a sustained increase in outbound mutual legal assistance (MLA) requests that help facilitate AML/CFT investigations and confiscations of different types of assets in line with its risk profile.
- Improving risk-based supervision of Designated Non-Financial Businesses & Professions (DNFBPs) and demonstrating that all AML/CFT supervisors apply effective, proportionate and effective sanctions for non-compliance.
- Ensuring that competent authorities have timely access to accurate and up-to-date beneficial ownership (BO) information on legal persons and arrangements and applying sanctions for breaches of violation by legal persons to BO obligations.
- Demonstrating a sustained increase in law enforcement agencies’ requests for financial intelligence from the Financial Intelligence Centre (FIC) for its AML/CFT investigations.
- Demonstrating a sustained increase in investigations and prosecutions of serious and complex money laundering and the full range of CFT activities in line with its risk profile.
- Enhancing its identification, seizure and confiscation of proceeds and instrumentalities of a wider range of predicate crimes, in line with its risk profile.
- Updating its CFT Risk Assessment to inform the implementation of a comprehensive national counter financing of terrorism strategy.
- Ensuring the effective implementation of targeted financial sanctions and demonstrating an effective mechanism to identify individuals and entities that meet the criteria for domestic designation.
“As can be seen from the above list, the new reporting obligation for trustees is an essential step in respect of achieving FATF compliance. We expect further such changes to be announced in the coming months,” said Ralph Wichtmann, Managing Director at Sovereign Trust (SA) Ltd.
“All trusts, whether registered with the South African Revenue Service (SARS) or not, are required to comply with the new legislation. SARS is also one of the government agencies with access to information supplied to the Master of the High Court and will now gain visibility on trusts that were never registered for tax or have never filed tax returns.
“This could have implications in terms of potential tax liabilities, penalties and interest, so it would be prudent for all trustees to ensure that the administration of SA trusts is up-to-date and, where necessary, obtain the services of professional independent trustees to ensure that the trust is compliant with the latest changes.”