The Trust Property Control Act 57 of 1988 (hereafter ‘the Act), is a fundamental piece of legislation that governs the management and control of trusts in many jurisdictions. A significant portion of this legislation is dedicated to reinforcing oversight over trustees and their management of trusts. This Act comprises 27 sections and came into operation on 31 March 1989. Section 7 outlines the appointment of trustee and co-trustee by the Master, Section 13 describes the power of the court to vary trust provisions, and Section 20 outlines the removal of a trustee.
Since its inception, the Act has not adapted to the evolving legal environment in South Africa. However, recently, the Trust Property Control Act underwent significant amendments. These changes were introduced to address several key issues, including the establishment and maintenance of beneficial owner registers for trusts by trustees and the Master of the High Court, as well as the recording of accountable institutions' details by trustees. The Amendment Act and the associated Regulations came into effect on April 1, 2023.
Why the TPCA was amended
The primary objective of these amendments in the Trust Property Control Act and associated regulations is to rectify deficiencies in South Africa's regulatory framework concerning the transparency of beneficial ownership. This action aligns South Africa with international standards set by the Financial Action Task Force (FATF) to combat money laundering and the financing of terrorism. The term "beneficial owner" now encompasses natural persons who directly or indirectly own trust property, benefit from trust property, or exercise effective control over trust administration arrangements established pursuant to a trust instrument. These provisions aim to enhance transparency in trust ownership and facilitate investigations into financial crimes.
Specific amendments to the TPCA
Maintaining beneficial ownership registers
Section 11A of the Act mandates trustees to establish and maintain up-to-date records of information related to beneficial owners of trusts, as specified in regulation 3C. The amendment imposes specific responsibilities on trustees regarding the identification and documentation of beneficial owners of trusts. Under the amended Act, trustees are legally required to identify and record information about the beneficial owners of the trust. Beneficial owners are natural persons who directly or indirectly have an ultimate interest in the trust property. This includes individuals who may not be formally designated as beneficiaries but have a stake in the trust's assets or exercise effective control over trust administration arrangements. Trustees must maintain comprehensive and up-to-date records of beneficial owners. These records should include a range of information about each beneficiary, such as:
- Full names
- Date of birth
- Nationality
- Official identity document number or passport number, including the type of document and the issuing country
- Citizenship
- Residential address
- Address for service of notices (if different from the residential address)
- Other means of contact (e.g., email, phone)
- Tax number (if the person is a registered taxpayer in the Republic)
- The class or category of beneficial ownership under which the person falls
- The date on which the person became a beneficial owner of the trust
- If applicable, the date on which the person ceased to be a beneficial owner of the trust
Lodging beneficial ownership registers with the Master of the High Court
The obligation to lodge beneficial ownership registers with the Master of the High Court is a significant requirement introduced by the recent amendments to the Trust Property Control Act (TPCA). Under the amended Act, trustees are legally obligated to submit beneficial ownership registers electronically to the Master of the High Court. These registers contain detailed information about the beneficial owners of the trust, as outlined in the previous section. The submission of these registers is a critical step in complying with the new regulations and ensuring transparency in trust ownership. Trustees can submit these registers using the following link.
Making disclosures to and record details of accountable institutions
Section 10(2) of the Trust Property Control Act requires trustees to disclose to accountable institutions with whom they engage in their trustee capacity that the transaction or business relationship pertains to trust property. Accountable institutions refer to financial institutions and other entities that are subject to anti-money laundering and combating the financing of terrorism regulations. These institutions play a crucial role in reporting and preventing financial crimes.
Furthermore, section 11(1)(e) of the Act mandates trustees to record the prescribed details of accountable institutions with whom they engage as agents or from whom they obtain services. These details include:
- The name of the accountable institution
- Registration details (if the institution is not a natural person)
- Official identity document number or passport number of the accountable institution (if it is a natural person), indicating the type of document and the issuing country
- Nature of functions (if the trustee uses the accountable institution as an agent)
- Nature of services (if the trustee obtains services from the accountable institution)
- Date and nature of single transactions (if applicable, as defined in the Financial Intelligence Centre Act)
- Date and nature of business relationships (if applicable, as defined in the Financial Intelligence Centre Act)
Penalties for non-compliance
Trustees who fail to comply with their obligations under the Amendment Act may face legal consequences. These offences include:
- Failure to disclose to an accountable institution that the transaction or business relationship relates to trust property
- Failure to record the prescribed details of accountable institutions
- Failure to establish and record the beneficial ownership information of a trust
- Failure to maintain an up-to-date record of beneficial ownership information
- Failure to lodge a register of beneficial ownership information with the Master of the High Court
Trustees convicted of these offences may be subject to penalties, including fines of up to R10 million, imprisonment for a maximum of five years, or both fines and imprisonment.
These amendments to the Trust Property Control Act and the associated regulations have introduced critical changes to improve the transparency and regulation of trusts in South Africa. Trustees, beneficiaries, and other involved parties must familiarise themselves with these new requirements to ensure compliance and avoid legal consequences.
Conclusion
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