SOUTH AFRICA — After 38 years, South Africa’s trust laws are undergoing a comprehensive overhaul with the introduction of the Regulation of Trusts Bill, a legislative move designed to crack down on money laundering, protect vulnerable beneficiaries, and enforce strict trustee accountability.
Earlier this week, the Cabinet approved the new bill, which will officially replace the outdated Trust Property Control Act of 1988. While trusts have long been utilized for legitimate purposes such as estate planning, loopholes in the current legislation have increasingly allowed them to be exploited to hide illicit funds, obscure beneficial ownership, and evade legal accountability.
Justice Minister Mmamoloko Kubayi highlighted that the Regulation of Trusts Bill seeks to address critical shortcomings that have historically constrained the Master of the High Court in exercising effective oversight. A primary driver for these reforms is aligning South Africa with global financial standards to prevent negative ratings and scrutiny by the Financial Action Task Force (FATF).
To achieve these goals, the legislation introduces several stringent proposed changes:
Protection of Vulnerable Persons
Under the new framework, when courts establish trusts for children or individuals with disabilities, they will be legally mandated to verify that the trust structure is entirely appropriate and that the beneficiary’s interests are robustly protected. This directly addresses historical abuses where lawyers or practitioners opened trusts for accident victims or those involved in medical-legal disputes, only for the awarded damages to be mismanaged. The new law requires courts to ensure the trust is the proper vehicle before granting practitioners permission to open one.
Mandated Transparency
To dismantle environments conducive to money laundering and other criminal activities, trustees will now be required to prepare annual financial statements. Furthermore, they must maintain these records for five years after they cease being trustees. However, the Minister retains the power to exempt trusts with minimal or no financial activity from these stringent annual reporting requirements.
Stronger Oversight and Penalties
The Master of the High Court will be granted sweeping new powers, including the authority to issue compliance notices, levy administrative fines, and appoint independent investigators. Currently, failing to lodge a beneficial ownership register with the Master of the High Court is an immediate criminal offense. The proposed bill shifts this approach, suggesting that non-compliance initially be addressed through administrative fines and compliance notices, reserving criminal sanctions strictly as a measure of last resort.
Land Reform Trust Reforms
The bill explicitly clamps down on the misuse of trusts in land restitution. It proposes that trusts should no longer be created to administer property returned to communities by the state. Instead, communities must utilize the rightful legislative vehicles, such as Communal Property Associations (CPAs), rather than defaulting to improper trust structures.
By ensuring that beneficiaries are clearly identified and safeguarded, the government aims to restore integrity to trust administration.
The Regulation of Trusts Bill is currently open for public feedback, and citizens are encouraged to submit their comments before the deadline on 11 September.
