The South African trust law introduction of beneficial ownership and additional responsibilities of trustees through the amendment of the Trust Property Control Act 57 of 1988

Abstract

The Trust Property Control Act 57 of 1988 (TPCA) was amended on 1 April 2023 following the enactment of the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act 22 of 2022. This amendment introduced a definition of a beneficial owner in section 1 and a new reporting duty in section 11A of the TPCA. However, the definition creates practical uncertainty in South African trust law and places trustees at risk of unfair statutory punishment. This research critically analyses the definition of a beneficial owner and discusses its suitability with South African trust law, such as in discretionary trusts where a beneficial owner can only be determined once a trustee exercises its discretion. The amendment of the TPCA raises concerns regarding its compatibility with existing legal principles, such as the distinction between trust property control and personal ownership by trustees. A comparative and critical analysis evaluates the TPCA's definition against that of the Financial Action Task Force (FATF) to determine how South Africa's legislature incorporated FATF recommendations. However, the TPCA's approach appears to be a rushed attempt to meet the FATF's recommendations without fully considering its suitability in terms of South African trust law and does not take cognisance of South African trust law principles such as the discretion of trustees in discretionary trust instruments, the complexity of ownership of trust assets, class of trust beneficiaries and the separation of control and ownership of trust property in South African trust law. This research further analyses the reasonableness of the reporting duties imposed on trustees. It is unrealistic to expect trustees to predict future discretionary decisions, and the statutory reporting duty is only suitable for bewind trusts with named beneficiaries. The amendment to the TPCA has led to the criminalisation and putative punishment of trustees who, in some cases, may be unable to comply with the reporting duty. This research argues that an alternative definition of beneficial ownership should be sought, which is suitable and can be absorbed into South African trust law.