“Accountable Institutions” are defined in the Financial Intelligence Centre Act 38 of 2001 (“FIC Act”) and essentially refer to entities that are responsible in terms of the FIC Act to conduct what is colloquially known as ‘FICA’ on their clients. Although an oversimplification of the responsibilities that fall on Accountable Institutions, these institutions have a responsibility to ensure they identify and verify (and where necessary report on) the identity of their clients and the legitimacy of their transactions.
Generally, the list of Accountable Institutions (expanded again in November 2022), includes entities that may be used as enablers, vehicles or actors in money laundering or terrorist financing, either willingly or unknowingly.
But what does this have to do with trusts you may ask? The Amendment Act has now amended the Trust Act to require trustees to also maintain a record of and make certain disclosures regarding the Accountable Institutions that they engage with. This amendment follows directly on the recommendations of the international Financial Action Task Force (FATF) that trustees must hold basic information in relation to the agents and service providers to the trust, including but not limited to investment advisors or managers, attorneys, accountants and tax advisors, and in this way also track which of these actors are working with a trust, given that trusts are generally viewed by enforcement agencies as opportune vehicles for hiding and facilitating criminal activities.
So, let’s look at what the Amendment Act and the proposed regulations to the Trust Act require. In terms of section 11(1) of the Trust Act trustees must disclose and to keep a list of the following:
- The names of Accountable Institutions which the trustees use as agents to perform any of its functions relating to the trust property.
- Whether or not the Accountable Institution is a natural person or legal entity. Where it’s a natural person, official identification of the person, which could be a South African ID or for a non-South African, a valid passport. Where it’s a legal entity, further particulars of that entity such as its registration number and other corroborating documentation.
- The purpose for which the trustees make use of Accountable Institutions. For example, whether the trustees make use of the Accountable Institution to perform any of the functions of the trustees and what the nature of these functions are.
Whether the trustees received or receives services from an Accountable Institution. Here the nature of these services provided by the Accountable Institution to the trustees should be specified and disclosed. This could include bankers, financial advisors, accountants and even estate agents.
- Where the trustees decide to conclude a single transaction with an Accountable Institution, the trustees must disclose the date on which that specific transaction was concluded with that specific Accountable Institution.
In the instance where the trustees decide to enter into a business relationship (as defined in FIC Act) with an Accountable Institution, the trustees must disclose the date on which that specific business relationship was entered into.
These new amendments will require of trustees to record such information and submit such to the Master of the High Court, where no doubt the information will form part of the information database that will be used by enforcement agencies.
Trustees should not underestimate what is asked of them, as they will have to not only identify the Accountable Institutions with whom their trust engages, but also determine the purpose, dates, nature of services, and correctly disclose the type of relationship, together with supporting documentation, to the authorities. Failing to correctly disclose the relevant information, even if unintentionally, may expose all trustees, including independent trustees, to fines up to R10 million and possible imprisonment of up to 5 years, or both.
Our dedicated Trust Office team assists our trust clients with all of the new reporting and disclosure requirements and can also help your trust do the necessary. Feel free to contact our Trust Team for assistance. You can find more information on our dedicated anti-money laundering legislation webpage.
Also keep an eye out for our follow up articles in which we explore in more detail the other areas affected by the Amendment Act as well as our online webinars on these new anti-money laundering amendments.
Disclaimer: This article is the personal opinion/view of the author(s) and is not necessarily that of the firm. The content is provided for information only and should not be seen as an exact or complete exposition of the law. Accordingly, no reliance should be placed on the content for any reason whatsoever and no action should be taken on the basis thereof unless its application and accuracy has been confirmed by a legal advisor. The firm and author(s) cannot be held liable for any prejudice or damage resulting from action taken on the basis of this content without further written confirmation by the author(s).