The Financial Action Task Force (FATF) was established in 1989 to coordinate an international effort to combat money laundering.
The word “beneficial owner” is used by the Financial Action Task Force (FATF) to identify a “warm body” with financially benefits. The FATF requires disclosure of these “warm bodies” to relevant institutions. Beneficial ownership transparency is used to combat financial crimes such as the financing of terrorism, money laundering, and tax evasion.
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. It also means any individual or group of individuals who, either directly or indirectly, has the power to vote or influence the decisions regarding a specific security, such as shares in a company. From the experience of countries implementing beneficial ownership registers to be effective, registers must cover all types of legal entities and arrangements, including trusts.
The FATF issued a guidance document on Transparency and Beneficial Ownership. This applies broadly to “legal persons” meaning any entities, other than natural persons, who can establish a permanent customer relationship with a financial institution or otherwise own property, which includes trusts.
The guidance document details that any country that allows for the creation and recognition of trusts should require the trustees to obtain and hold adequate, accurate, and current beneficial ownership information regarding the trust. This information should be kept as accurate, current and as up-to-date as possible by updating it within a reasonable period following any change. In this context, beneficial ownership information includes:
a) information on the identity of the fonder(s), trustee(s), beneficiary(s), and any other natural person exercising ultimate effective control over the trust, and
b) basic information on other regulated agents of, and service providers to the trust, including investment advisors or managers, accountants, and tax advisors.
The purpose of these requirements is to ensure that trustees are always responsible for holding this information. It is important that the trustees identify any person who owns or controls the trust in whatever capacity they may be in.
Amendments to local legislation have been made. Trustees should be aware of the changes to the Trust Property Control Act, as non-compliance may lead to 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.
Section 11A, as amended, require that information must be kept by trustees in relation to beneficial owners – direct/indirect individual beneficiaries of trusts, founders, trustees, beneficiaries and any individuals who exercise effective control over the administration of the trust:
It is more important than ever that trustees understand the requirements of the roles they play in trusts. They have a duty to meet these new requirements and if they fail to comply, they may be fined and/or imprisoned.
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your adviser for specific and detailed advice. Errors and omissions excepted (E&OE).