On 31 March 2023, the Department of Justice and Constitutional Development issued a special Regulation Gazette No. 11566 in Government Gazette No. 48351, outside regular business hours. This Gazette contains amendments to the regulations under the Trust Property Control Act, 57 of 1988 (TPCA), which align with the amendments made to the act by the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act, 22 of 2022 (the Amendment Act). These amendments will come into effect on 1 April 2023.
The changes to the TPCA have implications for accountable institutions in terms of the Financial Intelligence Centre Act (FICA). FICA is a set of regulations requiring accountable institutions, such as banks and financial services providers, to prevent money laundering and terrorist financing. Under FICA, accountable institutions have been expanded to include trust service providers and others who need to be registered with the Financial Intelligence Centre (FIC).
Accountable institutions must conduct customer due diligence (CDD) on their clients to identify and verify their identities and assess the risk of them being involved in illicit activities and report such suspicious activities to the FIC. The recent changes to the TPCA mean that accountable institutions must also take into account the beneficial owners of trusts when conducting CDD. This means that they must identify and verify the identities of the beneficial owners of trusts and assess the risk of them being involved in illicit activities. They must also monitor (and keep records of) the transactions and activities of the trust to ensure that they are legitimate and report suspicious transactions.
But what does this all mean? Let’s break it down into five amendments:
- Establishment and maintenance of a public register of persons disqualified from serving as trusteesThe first amendment requires the Master of the High Court to establish and maintain a public register of persons disqualified from serving as trustees. For this register, the Master must confirm the name, identity number or passport, and grounds on which the person is disqualified as serving as a trustee. The Master must also ensure that the public has easy access to the register. Considering the Master’s intention to implement this, it appears that the Master did not previously verify if the trustees were disqualified individuals, apart from relying on the trustees’ self-declarations made on the J417 Acceptance of Trustee forms.
- Recording of details of accountable institutions by trusteesThe second amendment requires trustees to record the details of accountable institutions. A trustee is required to record the following details of an accountable institution:
a) Name of accountable institution. d) If the trustee uses the accountable institution to perform trustee functions, the nature of the functions. g) If the trustee entered into a business relationship as defined in the Financial Intelligence Centre Act, 2001 (Act No. 38 of 2001) with the accountable institution, the date on which the business relationship was entered into. b) If the accountable institution is not a natural person (i.e. company or trust), the registration number of such an institution. e) If the trustee obtained or obtains services from accountable institutions, the nature of services. c) For natural persons, the identity document number, indicating the type of document and country of issue. f) If the trustee entered into a single transaction with the accountable institution, the date on which the transaction was entered into.
- Beneficial ownership information to be recorded by the trusteesThe third amendment requires the trustees to record “beneficial ownership” information. When we hear the word beneficial, we may think this refers to only the beneficiaries of the trust, but that is not the case. Beneficial owners include the founder, trustees and the beneficiaries listed (named) in the Trust Deed. The trustees must keep a record of the following information relating to each identified beneficiary owner of the trust:
a) The full names. d) An official identity document number, indicating the type of document and the country of issue. g) Other means of contact. b) Date of birth. e) Residential address. h) The grounds on which the person is a beneficial owner of the trust. c) Nationality. f) If different from the residential address, the beneficial owner’s address for the service of notices. i) The date on which the person became a beneficial owner of the trust. j) Where applicable, the date on which the person ceased to be an owner of the trust.
The trustees must submit the beneficial ownership information to the Master via their online portal. The Master has made a Google sheet available for download and completion of the information, after which it can be submitted via the Master’s online portal. In addition, the trustees must keep a certified copy of the identity document or passport of each beneficial owner of the trust on file or electronically.
The Master’s register on the beneficial ownership of trusts
The fourth amendment requires the Master to maintain a register of the beneficial ownership of trusts. This means that all the information provided by the trustees must now be consolidated into a single register called the Master’s Register of Beneficial Ownership of Trusts. This will most likely be a massive undertaking with more or less 950 000 trusts currently registered in South Africa and the Master will be very much reliant on the trustees to submit their information soonest.
The Master’s register of beneficial ownership of trusts must provide:
|a) Access to registered users through a username and password.
|d) A trustee to lodge, on the electronic register, the information of each beneficial owner that the trustee is keeping.
|g) A trustee to only have access to the information that the trustee lodged and the documents that the trustee has uploaded on the electronic register.
|b) Adequate measures against loss of information as a result of damage to or failure of the medium on which the information is kept.
|e) A trustee to update the information that the trustee has lodged on the electronic register.
|h) A search facility available to designated officials referred to Regulation 6 and other authorised officials.
|c) Adequate security measures
|f) A trustee to upload documents.
|i) A trustee to sign off electronically on the information the trustee has lodged.
Access to information contained in a beneficial ownership register
Both the Master and the trustees are required to provide access to the information recorded in the beneficial ownership register to:
|a) National Prosecuting Authority.
|e) The Intelligence Division of the National Defence Force.
|i) The South African Revenue Service (SARS).
|b) An investigating authority in the Republic.
|f) A special investigating unit.
|j) A person who is entitled to receive such information in terms of national legislation.
|c) The Independent Police Investigative Directorate.
|g) An investigative division in an organ of state.
|d) An intelligence service.
|h) The Public Protector.
The consequences of non-compliance
The fifth amendment has consequences for non-compliance. Failure to comply with these requirements may result in trustees paying a hefty penalty of up to R10 million, five years imprisonment, or both. Additionally, sanctions may be applied by the Master of the High Court and/or the Financial Intelligence Centre. The changes will result in inspections of the beneficial owner’s database resulting in penalties due to non-compliance.
We do urge all trustees to prioritise the setting up of the Beneficial Ownership Register, lodging the register on the Master’s portal and saving certified ID documents or passports of all beneficial owners on file, as soon as possible.
If you have any questions or need assistance with setting up and lodging the Beneficial Ownership Register of your Trust with the Master, please feel free to send an email to firstname.lastname@example.org and we will be happy to assist.
Written by Anrich Marais
Please note that these articles are to be considered general information sheets only and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information therein. Always contact one of your Finleys advisors for specific and detailed advice. Errors and omissions excepted (E&OE).