A lot has recently been said in the media about the possibility and impact of a Financial Action Task Force (FATF) greylisting for South Africa in February this year. We were greylisted on 24 February 2023, but new measures were already legislated in late December 2022 to strengthen South Africa’s anti-money laundering and terror financing legislation, in an attempt to prevent a potential greylisting. Few are aware of exactly what is expected of them as a result, and even fewer are aware of the massive penalties for non-compliance – a fine not exceeding R 10 million or imprisonment not exceeding 5 years, or both. Most of the amendments have an effective date of 1 April 2023; therefore not a lot of leeway is provided by Government for trustees and service providers to get their acts together.
In addition to that, the South African Revenue Service (SARS) is pushing ahead with the implementation of IT3(t) trust distribution submissions, which they have toyed with for a while, and asked for volunteers on its website on 28 November 2022 to assist SARS in its testing phase, scheduled for March to April 2023 – again not a lot of leeway for service providers.
What does this mean for trustees?
FATF has forced government to introduce new measures to ensure the country improves its image in combating money laundering and financial crimes. To this end, amendments were made to the Trust Property Control Act, which require trustees to:
- 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; and
- ensure that the prescribed information referred to above is kept up to date.
Beneficial owner transparency is one of the measures used to combat financial crimes, including tax evasion. The above changes came into effect on 1 April 2023.
Only a trustee or a person who has a power of attorney to act on behalf of the trustee(s) is allowed to capture the information. This emphasizes the active role all trustees (not just the independent trustee or the even trust service provider) should play. Trustees are also reminded to keep certified copies of ID documents of all “beneficial owners”.
What does a “beneficial owner” mean?
A beneficial owner is an individual who gets to enjoy ownership benefits even though the title to some form of the property is in the name of another individual. It also means any individual or group of individuals who, either directly or indirectly, has the power to vote or influence the transaction decisions regarding a specific security, such as shares in a company. It is clear from the experience of countries implementing beneficial ownership registers that in order to be effective, registers must cover all types of legal entities and arrangements (including trusts).
As the penalty clause in the new Section 19(2) of the Trust Property Control Act was also made effective as discussed above, trustees are now seriously exposed to the penalties alerted to above. All trustees (not just the independent trustee) and trust service providers should work closely together to meet these onerous obligations of trustees.
In addition to that, the South African Revenue Service (SARS) is pushing ahead with the implementation of IT3(t) trust distribution submissions, scheduled for March to April 2023.
Please contact Belinda Theron (belindat@bgralluvium.co.za) for assistance in this regard.
Greylisting measures enacted Trusts to become 3rd party data providers to SARS
A lot has recently been said in the media about the possibility and impact of a Financial Action Task Force (FATF) greylisting for South Africa in February this year. We were greylisted on 24 February 2023, but new measures were already legislated in late December 2022 to strengthen South Africa’s anti-money laundering and terror financing legislation, in an attempt to prevent a potential greylisting. Few are aware of exactly what is expected of them as a result, and even fewer are aware of the massive penalties for non-compliance – a fine not exceeding R 10 million or imprisonment not exceeding 5 years, or both. Most of the amendments have an effective date of 1 April 2023; therefore not a lot of leeway is provided by Government for trustees and service providers to get their acts together.
In addition to that, the South African Revenue Service (SARS) is pushing ahead with the implementation of IT3(t) trust distribution submissions, which they have toyed with for a while, and asked for volunteers on its website on 28 November 2022 to assist SARS in its testing phase, scheduled for March to April 2023 – again not a lot of leeway for service providers.
What does this mean for trustees?
FATF has forced government to introduce new measures to ensure the country improves its image in combating money laundering and financial crimes. To this end, amendments were made to the Trust Property Control Act, which require trustees to:
- 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; and
- ensure that the prescribed information referred to above is kept up to date.
Beneficial owner transparency is one of the measures used to combat financial crimes, including tax evasion. The above changes came into effect on 1 April 2023.
Only a trustee or a person who has a power of attorney to act on behalf of the trustee(s) is allowed to capture the information. This emphasizes the active role all trustees (not just the independent trustee or the even trust service provider) should play. Trustees are also reminded to keep certified copies of ID documents of all “beneficial owners”.
What does a “beneficial owner” mean?
A beneficial owner is an individual who gets to enjoy ownership benefits even though the title to some form of the property is in the name of another individual. It also means any individual or group of individuals who, either directly or indirectly, has the power to vote or influence the transaction decisions regarding a specific security, such as shares in a company. It is clear from the experience of countries implementing beneficial ownership registers that in order to be effective, registers must cover all types of legal entities and arrangements (including trusts).
As the penalty clause in the new Section 19(2) of the Trust Property Control Act was also made effective as discussed above, trustees are now seriously exposed to the penalties alerted to above. All trustees (not just the independent trustee) and trust service providers should work closely together to meet these onerous obligations of trustees.
In addition to that, the South African Revenue Service (SARS) is pushing ahead with the implementation of IT3(t) trust distribution submissions, scheduled for March to April 2023.
Please contact Belinda Theron (belindat@bgralluvium.co.za) for assistance in this regard.