New anti-money laundering amendment legislation to affect companies and trusts

21 February 2023 ,  Dr Damian Viviers 1339
Major amendments to South Africa’s anti-money laundering framework have almost unnoticed introduced serious changes to the trust and company law environment, including the addition of hefty fines and jailtime for trustees! So, although these changes have been aimed at the fight against money laundering and terrorism, the real impact of the amendments will be far wider. 

We will over the next few weeks, in a series of articles, unpack each of the major changes and their respective implications, commencing with this overview article addressing the reasons for the amendments and the main areas of law affected.

South Africa’s anti-money laundering framework was recently assessed by a joint International Monetary Fund, the Eastern and Southern African Anti Money Laundering Group and the Financial Action Task Force (“FATF”). In the report a number of weaknesses and shortcomings were identified in the current South African financial regulatory framework. According to the report, South Africa has emerged as a hub for money laundering, terrorist financing and corruption.

The result was a strong message to South Africa to correct these weaknesses with South Africa required to report to the FATF on a regular basis as to the steps taken to improve the South African framework against financial crimes. These improvements are essential for South Africa to avoid being grey listed in February 2023. If grey listed, South Africa will be deemed a high risk jurisdiction to transact with, the FATF will increase its monitoring of South Africa, potential investors will have to jump through more hoops to invest in South Africa, and South Africa could even be limited or shut out of certain financial markets, all consequences dire for our already under pressure economy. 

As part of the steps to curb the grey listing, Government late in December 2022 approved and signed into law the General Laws (Anti-Money Laundering and Combatting Terrorism Financing) Amendment Act 22 of 2022 (“Amendment Act”). As long as the name is, so too is the list of changes by the Amendment Act as is aims to bring South Africa’s regulatory framework in line with the expectation of the FATF and international standards. 

The Amendment Act amends a number of existing statutes, which in turn has an impact on the various areas of law and business which they regulate. The statutes that have been amended are:

The Trust Property Control Act 57 of 1988 (“Trust Act”)
The Companies Act 71 of 2008 (“Companies Act”)
The Financial Intelligence Centre Act 38 of 2001
The Non-profit Organisations Act 71 of 1997
The Financial Sector Regulation Act 9 of 2017

Of particular relevance are the amendments to the Trust Act and the Companies Act which now require a number of additional compliance steps to be taken by trustees and companies on a regular basis and will affect virtually every trust and company in South Africa, with non-compliance resulting in fines and possible imprisonment in the case of trustees and business restrictions in the case of companies.

With trusts, one can summarize the new compliance requirements as them now requiring trustees to document and record the beneficial ownership structure of a trust as defined by the Amendment Act, lodge this with the Master of the High Court and keep records of the engagement of Accountable Institutions by the trust up to date.

In the case of companies, there is a new obligation to record the beneficial ownership structure of the company, as well as to include the securities register of the company in the annual return to be submitted to the Companies and Intellectual Property Commission.

A number of provisions of the Amendment Act are already in force, with most of the remaining provisions taking effect as of 1 April 2023 as part of the process to avoid South Africa being grey listed. Once in effect, all trustees and companies will have to comply, particularly given the dire consequences following non-compliance. 

Be sure to keep an eye out for our follow up articles in which we explore in more detail each of the areas affected and what the new compliance requirements mean. And make sure to keep an eye out as well for our online webinars coming soon on these new anti-money laundering amendments.

Related articles:
Trustees beware! You can now be fined and jailed!
Alert: South Africa’s grey listing means extensive new compliance requirements!

Register for our webinar: Attend our exclusive webinar about the vital changes introduced by this new anti-money laundering legislation



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).
 
Related Sectors: Wealth Management
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