What is Greylisting and how does it affect Trusts?
South Africa was greylisted on 24 February 2023, which means that our country’s compliance issues are now recognised, but that our government has committed to addressing identifiable inadequacies to counter money laundering and terrorist financing within a given time frame.
The FATF (Financial Action Task Force) has set up a framework of 40 recommendations with best practices to combat money laundering and promote international cooperation.
To comply with the FATF requirements, SARS requires information on beneficial owners of trusts. The following types of beneficial owners have been identified:
- Founder
- Trustee
- Beneficiary – identifiable when interpreting the trust instrument
- Donor
SARS regards the ultimate beneficial owner to always be a natural person.
If the beneficial owner is identified as a legal entity, legal arrangement or other, sufficient information and details should be provided to clearly identify the ultimate natural person that will benefit from the assets or income of the trust.
Amendments to various legislation have been made through General Laws and have an effective date of 1 April 2023. The following changes were introduced:
- New Section 1 definitions of “accountable institution” and “beneficial owner.”
- New Section 6(1A) – Specify matters that would disqualify a person from acting as a trustee.
- Amended Section 8 – Foreign trustees to act only if authorised by Master in writing.
- New Section 10(2) – Requires a trustee to disclose their position as a trustee to any accountable institution with which the trustee engages in that capacity and to make it known to that accountable institution.
- New Section 11(1) – Trustees to provide details of accountable institutions which the trustees use as agents to perform trustee functions and who provide any services to the trustees (more clarification is required on this point).
- New Section 11A – information must be kept by trustees concerning beneficial owners – direct/indirect individual beneficiaries of a trust, founders, trustees, beneficiaries and any individuals who exercise effective control over the administration of the trust:
- Trustees have to lodge and keep up-to-date records of the beneficial ownership of the trust
- Trustees have to lodge a register of the prescribed information on the beneficial owners with the master
- Trustees and the Master must make the information contained in the register available to any person as prescribed after consultation with the Minister of Finance and the Financial Intelligence Centre.
What does it mean for trustees and trust services providers?
Trustees and service providers are to keep a register of information of the natural persons who are the ultimate beneficiary of any trust and are to be in a position to provide this information to SARS, banking institutions and any other person/agency who has been nominated by the Finance Minister and the Financial Intelligence Centre.
The register has to include information on the trustees, founder, donor and beneficiaries.
The trustees have a duty to meet these new requirements, and if they fail to comply, they may be fined and/or imprisoned.
Let us help you to ensure the compliance of your trust.