Are you part of a Trust? We want to let you know about a recent change in legislation. NOT knowing about this change could result in a fine of up to R10,000,000, 5 years of imprisonment…or both. So yes, it is hugely important to be aware of this.
Let’s talk Trusts
“A trust is a legal arrangement whereby control over property is transferred to a person or organisation (the trustee) for the benefit of someone else (the beneficiary).” – www.gov.za
Trusts have been around for over two centuries. South Africa introduced Trusts when the Cape became a British Colony. Since then, it has provided individuals with greater estate control and flexibility in wealth distribution. There are many benefits to having a Trust. If you ever wanted to run through those we would be happy to chat further. That isn’t what this article is about though. There is unfortunately a dark side to Trusts, and that involves Money Laundering.
Money Laundering
For the longest time, it was only necessary to have the details of the Trustees, Beneficiaries and the Founders of a Trust (The Trust Property Control Act, 1988 (Act No. 58 of 1988). Trusts did not require beneficial owners to provide their details. Criminals exploited this loophole by utilising Trusts as a means to acquire assets and launder money.
In March 2023, legislators passed an amendment that closed the loophole, imposing a deadline of 1 April 2023. It is crucial to be aware of this change as it applies to EVERYONE involved in a Trust, and ignorance of the changes will not absolve you of guilt.
Amendment to the Trust Legislation
The Trust Property Control Act, 1988 (Act No. 58 of 1988) (“the Act”) was recently amended by the General Laws (Anti Money-Laundering and Combating Terrorism Financing) Amendment Act, 2022 (Act No. 22 of 2022) (“the Amendment Act”), and the point of this change was to keep track of the Beneficial Owners of Trusts.
“Beneficial owner” means a natural person who directly or indirectly ultimately owns the relevant trust property, natural person who benefits from the trust property or a natural person who exercises effective control of the administration of the trust arrangements that are established pursuant to a trust instrument. These provisions are intended to ensure transparency with regard to ownership of trust property and to assist in the investigation of financial crimes. – Read more
To put this into simpler terms, there will ALWAYS be a natural person behind the ownership of all legal entities or assets in a trust even if that person is behind a few layers of legal entities. That person (or people) is ultimately the one who pulls the strings and reaps the rewards hence the BENEFICIAL Owner. The beneficial ownership register of the trust must now legally record that person’s details. Most cases involve multiple beneficial owners. Keep in mind that listing is mandatory for any person who is involved in a Trust, regardless of their role as a Founder, Trustee, or Beneficiary.
What do you need to do?
First, identify all beneficial owners in the Trust, and then collect ID copies of these individuals, either by yourself or with the help of the Trust Administrator. The Administrator will need Power of Attorney to collect this information. NB to note – your Administrator is NOT automatically your accountant or independent trustee. Please don’t assume that they are on top of this. A trust administrator needs to be engaged in that specific role. It is not the responsibility of accountants or independent trustees to administer the trust unless specifically engaged in that
Once that’s done, click on this link from the justice.gov.za. website and complete the form. Submit the form on the Master’s portal.
At aXia Consulting, our tagline is “Adding Value”. We stay updated on financial regulations and changes to provide that knowledge to our clients. If you find the Trust legislation amendments overwhelming, reach out to us at admin@axiaconsulting.co.za . We will be happy to schedule a free consultation. With 50 years of combined expertise, we are here to help and take the burden off your shoulders.
The aXia Team
www.axiaconsulting.co.za/
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