Increased Risk and Additional Minimum Requirements for Independent Trustees
This article discusses the implications of Act No. 22 of 2022: General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act, 2022, recently passed by the South African government. The act introduces additional compliance burdens for trustees of the Trust Property Control Act, 1988 (TPCA) and increases the risk associated with acting as an Independent Trustee. This article aims to inform Independent Trustees about the updated definitions, requirements, and reporting obligations imposed by the amended legislation.
There are also several changes to reporting requirements at SARS that will be addressed in a separate article. Trustees should however stay informed as filing season is around the corner.
Amendments to the Trust Property Control Act (TPCA) and Financial Intelligence Centre Act:
The TPCA has been amended to redefine “accountable institution” and “beneficial owner,” which disqualifies certain individuals from acting as trustees. Foreign trustees must now obtain written authorization from the Master and disclose their position as a trustee to accountable institutions. Additionally, the definition of trustees and related service providers in the Financial Intelligence Centre Act has been expanded to include persons engaged in creating trust arrangements for clients and those involved in transactions (including as a trustee) related to the control, investment, safekeeping, or administration of trust property.
FIC Registration and Reporting Requirements:
It is advisable for all Independent Trustees comply with the ACT and ensure that they are correctly registered as an accountable institution in terms of the Financial Intelligence Centre Act.
Directive 6 outlines the reporting obligations under the Financial Intelligence Centre Act. Independent Trustees were required to submit information regarding their understanding of money laundering, terrorist financing, and proliferation financing risks, as well as their assessment of compliance with FIC Act obligations, by 31 May 2023. Failure to submit the report may result in administrative penalties.
Compliance and Penalties:
Independent Trustees are now required to maintain up-to-date records of beneficial ownership and submit a register of prescribed information to the Master. Non-compliance with these requirements may lead to fines of up to R 10 million, imprisonment for a maximum of 5 years, or both. The Master has the authority to remove a trustee who becomes disqualified or fails to comply with the TPCA.
Role of Sentinel as an Independent Trustee:
Sentinel assumes the role of guiding all trustees in navigating the additional compliance burdens and fulfilling their fiduciary duty. As an Independent Trustee, Sentinel prioritizes acting in the best interests of beneficiaries and meeting compliance requirements. If assistance is needed for new Independent Trustee services, contact Sentinel at email@example.com.
The passage of Act No. 22 of 2022 has introduced increased risk and additional minimum requirements for Independent Trustees in South Africa. It is crucial for trustees to familiarize themselves with the amended legislation, maintain compliance, and seek guidance from trusted sources to fulfil their fiduciary duties effectively.
Author: Chanel Schoeman
(Bcom (Law), LLB, Admitted Attorney, Advance Diploma in Trust and Estates, Advance Professional Certificate in International Taxation)