Trusts are a cornerstone of South African estate planning and asset protection. A trust separates control and enjoyment, with trustees owning and administering assets for the benefit of defined beneficiaries under the terms of a written deed. When people speak about trust funds they usually mean the portfolio of cash, property and investments that trustees hold and manage for those beneficiaries. Because a trust can hold significant value and can distribute funds over many years, regulators view trusts as potential vehicles for financial crime if they are not run transparently. That is where the FICA Act comes in.
What is the FICA Act?
The FICA Act is short for the Financial Intelligence Centre Act 38 of 2001, read together with its later amendments. It builds South Africa’s anti money laundering and counter terrorist financing framework. In plain language it requires certain businesses and professionals to know who their clients are, to understand the risk that each client poses, to keep proper records, and to report suspicious activity. Over the past few years the law has expanded so that more players connected to trusts fall within scope. Trustees and the service providers who work with them need to understand how the FICA Act applies in practice.
A useful starting point is the concept of an accountable institution. Banks, attorneys, trust and company service providers and several other categories are listed as accountable institutions in schedules to the FICA Act. If your trust engages with any accountable institution, that institution must apply a risk based approach to the trust as a client. That includes identifying and verifying the trust itself, the trustees, the founder, anyone who exercises effective control and the beneficiaries or classes of beneficiaries. The goal is to establish beneficial ownership and to understand who ultimately owns or benefits from the assets in the trust fund.
Recent guidance has sharpened the definition of trust and company service providers. In practice, if a firm forms trusts, provides registered office or fiduciary services, acts as or arranges for a person to act as a trustee, or manages the affairs of a trust, it will have FICA duties. Those duties include developing a documented risk management and compliance programme, performing client due diligence, screening for politically exposed persons and sanctions exposure, monitoring transactions on an ongoing basis, and filing the required regulatory reports. Even where a trustee is not an accountable institution in their personal capacity, trustees still feel the effects because banks, brokers and fiduciary firms will not open or maintain accounts without complete compliance files.
What does this look like for a typical family trust?
When the trustees open or maintain a bank or investment account they will be asked for the deed, the Master’s letters of authority, trustee resolutions, certified identification and proof of address for all trustees and often for the founder and any controlling persons. If the beneficiaries are named, each beneficiary’s details may be required. If the beneficiaries are described as a class, the institution will still want to understand the class and may require details if and when distributions are made. Where a protector or any other person can influence trustee decisions, their details must be provided as well. Many institutions will also request proof that the trust has met South Africa’s beneficial ownership obligations at the Master’s Office, since transparency across regimes is now expected.
The FICA Act expects more than a one-off file. Accountable institutions must conduct ongoing due diligence. That means trustees can expect periodic refresh requests for updated documents, confirmation of addresses and screening checks. If trustees add or remove a trustee, change the place of administration, amend the deed, or distribute to new beneficiaries, the compliance profile changes and the file must be updated. Institutions will ask questions about the source of funds that flow into the trust and the source of wealth that created the trust fund, especially when large deposits or transfers are made. They will also look at expected account activity and compare it to actual activity to detect anomalies.
Reporting is another key implication. The FICA Act requires accountable institutions to file suspicious and unusual transaction reports when activity does not make sense in light of what is known about the client. Threshold cash transaction reports and cross-border transfer reports may also be required in defined circumstances. Trustees should not view reporting as punitive. It is part of the defensive wall that keeps the South African financial system open to legitimate investment and closed to abuse. When trustees manage trust funds prudently and with transparent records, reporting is a low-friction background process handled by the institution.
Consequences of non-compliance
Non-compliance with the FICA Act carries real consequences. The Financial Intelligence Centre and supervisory bodies can impose administrative sanctions which may include directives to remediate, financial penalties, and orders to take specific corrective steps. In serious or wilful cases criminal liability can apply. Even before penalties are considered, the practical consequences can be severe. Banks may decline to open accounts or may restrict activity on existing accounts until documents are supplied. Investment platforms can freeze trading pending verification. Professional advisers risk being reported to their supervisory bodies if they proceed without adequate due diligence. For a trust fund that needs to pay school fees, settle property rates or complete a property transfer, a restricted account can cause cascading problems that cost far more than diligent compliance would have.
It is helpful to remember that the FICA Act is risk-based. That means processes scale with risk. A long-standing family trust with stable rental income, full records and predictable distributions typically presents lower risk than a newly formed trust with complex cross-border flows and opaque beneficiaries. Trustees can lower the perceived risk by keeping minutes, resolutions, financial statements and contracts well organised and readily available. They can also demonstrate that the trust has a clear purpose and that transactions align with that purpose. Good governance and good FICA outcomes tend to travel together.
Responsibility for compliance
Trustees often ask whether compliance duties are theirs or their service provider’s. The answer is both. The bank, attorney or fiduciary firm must comply with their own FICA Act obligations. Trustees must supply accurate and timely information and should run the trust in a way that sustains transparency. That includes keeping a current schedule of trustees and beneficiaries, passing resolutions before significant actions, documenting the reasons for distributions, and maintaining clean audit trails for funds that flow into and out of the trust fund. Trustees should also be aware of their obligations to record and file beneficial ownership with the Master of the High Court under related but separate reforms. While those obligations sit outside the FICA Act itself, the regimes complement each other and gaps in one will raise questions in the other.
How to prevent friction with the FICA Act
There are practical ways to reduce friction. Trustees can build a simple compliance pack that includes the deed, letters of authority, current trustee IDs and proof of address, a specimen signature page, a list of beneficiaries and classes, a standing resolution for account mandates, and the latest signed financial statements. Updating that pack after each annual meeting keeps it fresh. Before a new transaction such as a property purchase, trustees can give early notice to the bank and conveyancer of the documents they will need. That simple step keeps transactions on schedule and avoids last minute scrambles.
How Crest Trust can help
Crest Trust supports clients with both governance and compliance. We help new trusts bake in clarity about purpose and powers, and we maintain tidy records that make FICA reviews straightforward. We also act as independent trustees, which strengthens risk management and reduces alter ego concerns. Our goal is a smooth relationship with banks, brokers and regulators so that trustees can focus on prudent stewardship of the trust fund.
Conclusion
In summary, the FICA Act is not an obstacle to trusts. It is a framework that keeps trust funds connected to the regulated financial system on fair and predictable terms. When trustees understand the purpose of the law, prepare documents in advance, and respond promptly to refresh requests, the result is an efficient administration that protects beneficiaries while meeting national and international expectations.
FAQs
What is the purpose of the FICA Act?
The FICA Act exists to prevent and detect money laundering and terrorist financing by requiring accountable institutions to know their clients, keep records, understand risk, monitor transactions and report suspicious activity. It supports the integrity and stability of South Africa’s financial system.
What are the FICA requirements?
Core requirements include client identification and verification, understanding beneficial ownership and control, assessing and documenting risk, ongoing monitoring and screening, record keeping for prescribed periods, and filing the required regulatory reports. Institutions must implement a written risk management and compliance programme and update it as risks evolve.
What is the FICA Act 2017?
This refers to significant amendments that came into effect around 2017 which introduced the risk based approach in full, expanded due diligence duties, and strengthened beneficial ownership expectations. Later amendments and guidance have continued to refine scope and practice.
What is the FICA Act 38 of 2001?
This is the original enabling statute that created the Financial Intelligence Centre and set out South Africa’s anti money laundering and counter terrorist financing regime. It has been amended multiple times to keep pace with international standards, but it remains the foundational law that governs how institutions apply the FICA Act to clients such as trusts.