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Greylisting: new laws
impacting SA trusts
In February 2023, the Financial Action Task Force (FATF) placed South Africa on a list of countries under increased monitoring – known as the grey list – after identifying deficiencies in the country’s anti-money laundering (AML) and counter financing of terrorism (CFT) controls. To address these shortcomings, South Africa has legislated new measures, including far-reaching amendments to the Trust Property Control Act (TPCA). Here’s what trustees need to know.
While the FATF has acknowledged the significant progress made by our government in addressing the recommendations highlighted in its Mutual Evaluation Report of October 2021, it has identified several areas of deficiency in relation to the effective implementation of South Africa’s AML/CFT laws. The FATF is of the view that further improvements are needed to rectify inadequacies in the fight against financial crime.
South Africa has fast-tracked several legislative interventions to help address these shortcomings. In the context of trusts, which have long been regarded as potential vehicles for tax evasion, money laundering and even terrorism financing, the TPCA has been amended to include onerous new reporting obligations of trustees.
The amendments, which came into effect on 1 April 2023, set out a new definition of the term ‘beneficial owner’. A beneficial owner now includes the founder of the trust, all trustees as well as all beneficiaries mentioned by name in the trust instrument. If any of these parties is a legal person such as a company, it must be established who the natural person or persons are who effectively control or own that company.
In terms of Section 11A(1) of the TPCA, the trustees must:
Section 10(2) of the TPCA stipulates that trustees:
As the representative taxpayers of a trust, trustees also have to report to the South African Revenue Service at the end of September of each year on the following:
The onus for all this additional reporting falls on the trustees, and failure to comply is a criminal offence punishable by up to five years’ imprisonment or a hefty fine of R10 million. These harsh punitive measures are indicative of the hard-line approach our government is taking with regard to non-compliance.
These are indeed sweeping changes to the South African trust landscape, and it is imperative that trustees understand everything that is required of them. It’s therefore crucial to ensure that your trust has an independent, professional trustee who understands and is equipped to deal with these changes.
A corporate trustee such as Sanlam Private Wealth will see to it that the proper systems are in place to ensure compliance on behalf of our clients. Please do not hesitate to contact Kajal Chowthee on +27 (31) 560 3666 or kajalc@privatewealth.sanlam.co.za for more information on our independent trustee services and how we can assist.
The formation and registration of trusts, and the provision of independent trusteeships – both local and offshore.
The creation of BEE, charitable, special and Shariah trusts compliant with regulatory and legislative requirements.
The administration of deceased estates in South Africa and abroad.
Advice on complex structures, asset restructuring and bequests in foreign jurisdictions.
Advice on emigration and immigration, foreign earnings and the application of any double taxation agreements.
Updating trust deeds to ensure they’re in line with the latest changes in the trust environment.
Updating and/or drafting of wills dealing with South African and/or foreign assets.
Advice on the establishment and management of charitable organisations, their tax status and tax deductible donations.
Advice on the potential tax consequences and reporting obligations if you hold a US passport or green card, or if you have children living in the US.
Guidance on the financial implications of life-changing events, such as getting married, divorce or the birth of a child.
Expert advice is crucial in dealing with cross-border estate and tax planning.
Stanley Broun has spent 13 years in Fiduciary And Tax.
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