Introduction:

The General Laws (Anti-Money Laundering & Combatting Terrorism Financing) – Amendment Act 2022 (“GLAA”) was passed in 2022, and was Gazetted and came into force in January 2023.

The GLAA amended certain statutes, including the Trust Property Control Act 1988 (“TPCA”), as well as the Companies Act 2008 (“Companies Act”).

The purpose of the amendments to the GLAA is to bring same into line with international anti-money laundering, anti-corruption and anti-terrorism protocols, and in consequence in addition to the common law duties of a trustee, additional obligations are imposed upon trustees in terms of the amendments to the TPCA.

A consequence of these amendments is that trustees are now responsible for providing all prescribed information regarding the trust, its founder (also referred to as the settlor or donor – if not deceased), the trustees and the beneficiaries – to the Master of the High Court (“Master”), who will maintain a register (on a database) which can be updated from time to time (by those authorised to access the database), and will also provide access to the database by (other) persons and institutions who qualify as authorised to access same.  (The Master’s database will accordingly be, in a manner, similar to the database of the Companies and Intellectual Property Commission (“CIPC”).

Whilst the trustees hold the assets of the trust, where applicable, in a nominee capacity, the obligations of the trust fall to be discharged by the trustees.

The obligations of the trust brought about by these amendments will be briefly summarised below.

Whilst the obligations of a trustee, owed to third parties, but also to the beneficiaries of the trust (and indeed by a trustee to his/her co-trustees), are in terms of the common law and the TPCA quite onerous, the effect of these amendments is to impose additional obligations on trustees, with severe consequences for non-compliance, and it is recommended that trustees fully acquaint themselves with the effect and implications of these amendments.

The amendments to the Trust Property Control Act, and disqualification of trustees, in brief:

Bank account of a trust:

– persons who are disqualified from acting as a trustee will now extend to an unrehabilitated insolvent, a person who has been removed as a trustee due to misconduct and crimes involving dishonesty, and a person who is prohibited from acting as a director to a company – and similar offences;

– the Master must maintain a public register of persons who are so disqualified as serving as a trustee;

– a trust which receives monies, directly or via a trustee, must ensure same are deposited into a dedicated account (of the trust) at a bank, and accordingly the trust itself should have an operational banking account or otherwise ensure that those funds are deposited into the trust account of an accountable institution – attorney, auditor or estate agent, etc., as the case may be.

Disclosure by trustees:

– trustees are obliged to disclose to “accountable institutions”, i.e. banks, attorneys, auditors/accountants, financial service providers, life insurance companies/brokers, Government Departments, and others falling within the definition of “accountable institution”, as referred to in the Financial Intelligence Centre Act 2001 (“FICA”), the prescribed information relating to the trust, its founder, trustees, beneficiaries, etc.;

– the trustees are accordingly responsible for ensuring that in all such dealings and transactions the trust is FICA compliant;

– the disclosures must include the basis of the business relationship and transactions, and that the trustee acts in his/her capacity as such and not personally;

– the trustees must further maintain record of the accountable institutions which are employed or contracted to perform any of the trustees functions relating to the trust’s assets and the services to be rendered for and on behalf of the trust.

Ownership:

– the further purpose of the amendments is to ensure that all the entitled third parties, as referred to, are aware as to the beneficial ownership of the trust’s assets (that these are not the personal assets in terms of an actual or contingent right of the founder and/or the trustees) unless, as the case may be, the founder and/or a trustee or trustees are also capital and/or income beneficiaries of the trust – in which event a full disclosure must be made;

– the Companies Act has similarly been amended as same allows for nominee ownership of shares, subject to certain provisions, and it is now required that the beneficial owner, other than the nominee, be disclosed;

– beneficial ownership will accordingly relate to the following:

      – the natural person who directly or indirectly owns the relevant trust asset/s;

      – the natural person who directly or indirectly exercises effective control over the trust in terms of the Trust Deed;

      – the founder;

      – each trustee; and

      – each beneficiary;

      – in all instances where the founder and/or trustee or beneficiary may be another trust or company or partnership, the requirements are that a full           disclosure as to the natural person who stands behind and exercises effective control must be made.

Registers to be maintained:

– the regulations in terms of GLAA and TPCA (still to be published) which will contain the information referred to above (disclosures by trustees), including the names, Identity and Registration Numbers of the individuals and accountable institutions, the services required to be rendered by the accountable institution – on behalf of the trustees, the nature of the business relationship and transactions; and

– the register and records must contain details of the beneficial owners of the trust – to be lodged with the Master; and

– in addition, full particulars, with regard to the relevant persons as to their nationality, residential address, physical address for service, contact details, etc., will have to be provided, as will be detailed in the regulations (to be published); and

– certified copies of Identity Documents and other applicable source documents will need to be retained.

Conclusion:

Trustees will accordingly now be burdened with these additional obligations, in addition to the FICA verification and compliance obligations as have previously existed.

Trustees who fail to comply with these obligations will have committed an offence, and can on conviction, be liable to a fine not exceeding R10million or imprisonment not exceeding five years, or both.

It is recommended that trustees ensure that they are at this time, and as and when the regulations referred to come into force, fully conversant with the requirements and the obligations, and ensure that their auditors/accountants, attorneys and other accountable institutions with whom the trust has a relationship, are provided with the information and registers required.

The above summary is intended to provide guidelines for those concerned, the details and explanations herein provided to be viewed in this context, as same are not necessarily complete or exhaustive and are only intended to provide an early alert and focus on the relevant amendments and the affects thereof.

By Steven Klagsbrun (Director) and Candace Schoeman (Director) | Corporate and Commercial Department