New trust regulations relating to beneficial ownership registers and records of details of accountable institutions

The General Laws (Anti Money Laundering and Combating Terrorism Funding) Amendment Act was assented to by the President in December 2022, deep into the traditional festive holiday season. This was part of South Africa’s efforts to combat the country’s greylisting status. These amendments introduce a new definition of a ‘beneficial owner’ into the Trust Property Control Act No. 57 of 1988 (“the Act”), as well as obligations on trustees to maintain registers of beneficial ownership and to record details of accountable institutions.

What is a beneficial owner?

The new definition of a beneficial owner covers the following persons:

a natural person who directly or indirectly ultimately owns the relevant trust property
a natural person who exercises effective control of the administration of the trust arrangements that are established pursuant to a trust instrument
each founder of the trust
each trustee of the trust
each beneficiary referred to by name in the trust instrument or other founding instrument in terms of which the trust is created

Where the person involved is a legal person, it then refers to the natural person who directly or indirectly ultimately owns or exercises effective control of that legal person.

What is concerning in respect of this new definition is that it is contrary to the fundamental trust concept whereby ownership and control is separate to benefit and enjoyment. It is therefore held that the “label” applied to the definition may create a very misleading interpretation of these parties’ rights and obligations. We can only hope that reason should prevail to limit the application of the definition for the purposes of the register to be maintained.

Register of beneficial ownership

In terms of Section 11A of the Act, a trustee must:

establish and record the beneficial ownership of the trust
keep a record of the prescribed information relating to the beneficial owners of the trust
lodge a register of the prescribed information on the beneficial owners of the trust with the Master’s Office
ensure that the prescribed information above is kept up to date

When maintaining the register of beneficial ownership, the prescribed information to be recorded is:

the full names
date of birth
nationality
an official identification document number, indicating the type of document and the country of issue
residential address
if different from residential address, the beneficial owner’s address for service of notices
other means of contact
the grounds on which the person is a beneficial owner of the trust
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.

A trustee must also retain a certified copy of an official identification document of each identified beneficial owner of the trust.

Accountable institutions

Section 11(1)(e) of the Act prescribes that a trustee shall record the prescribed details relating to accountable institutions which the trustee uses as agents to perform any of the trustee’s functions relating to trust property, and from which the trustee obtains any services in respect of the trustee’s functions relating to trust property. The term “accountable institution” is defined as a person or organisation referred to in Schedule 1 of the FIC Act that carries out business of any entity listed.

When are these amendments effective?

The obligations on the trustee to maintain the register of beneficial owners and record of accountable institutions is effective as from 1 April 2023. It is however noted that no date has been prescribed for submission of the information on the beneficial owners to the Master’s Office – that will only be effective from a date to be determined by the President by proclamation in the Gazette.

What is the repercussion of non-compliance?

The newly proposed amendments to Section 19 of the Act state that a trustee who fails to comply with the obligations related to the register of beneficial owners or record of accountable institutions commits an offence and on conviction is liable to a fine not exceeding R10 million, or imprisonment for a period not exceeding five years, or to both such fine and imprisonment.

However, this latest proposal is only set to come into effect from a date to be determined by the President by proclamation in the Gazette.

What should trustees be doing now?

It is clear that trustees should be taking the necessary steps to gather the required information so as to maintain the relevant register of beneficial owners, as well as the record of accountable institutions. They must further ensure that this information is kept up to date, and when required by the legislation, to submit the details to the Master’s Office.

Neil Hughes

Director: Tax