13 Jun 2018

Gaborone Bonnington North MP Advocate Duma Boko says the Trust Property bill will not significantly alter the manner in which trusts are currently regulated.

Debating the bill on Tuesday, Adv Boko said Botswana’s legal framework had always provided for the regulation of trusts and their accounts, stating that trusts were currently being registered and audited.   

Regarding the concern by some legislators that law firms and their trust accounts also needed to be regulated and closely monitored, the MP indicated that such as concern was unfounded as the firms and their accounts had always been subjected to annual auditing, with appropriate action being taken in all instances in which any had been found to have fallen foul of the provision of the Legal Practitioners Act.

“All the trust accounts of law firms in this country are audited by professional auditors and that audit process if overseen by the Law Society of Botswana pursuant to the Legal Practitioners Act,” he said.

On the one hand, Adv. Boko said despite the misgivings it remained vital for legislators and all Batswana to understand why it was important to set up trusts.

He said trusts remained a more relaxed legal vehicle that allowed people to better secure their properties.

He said in cases where one had movable properties that still owed, one could put them under one trust and secure those properties that were fully paid up in another trust so that they could not be attached in situations that warranted the attaching of properties.

Emphasising the importance of the proposed law, Gaborone Central MP Dr Phenyo Butale highlighted why it was essential to not wait for people to loot and steal billions before crafting the necessary pieces of legislation.

MP Butale said there were cases the world over of entities such as trusts being used for the wrong and often criminal purposes.

The MP said when enacting the bill into law, government should ensure that law enforcement agencies such as NBFIRA and DCEC were empowered to monitor compliance to anti-money laundering laws by regularly giving compliance reports.

For his part, MP Ndaba Gaolathe of Gaborone Bonnington South shared the sentiment that trusts needed to be regulated not only to contain the risk of money laundering but to also contain the simple risk of fraud, which had become evasive across various sectors.

Mr Gaolathe however cautioned against the powers given to the Master of the High Court to cause any investigation into the handling of trust funds if they deemed such an investigation necessary.

The provision, he pointed out, was overly broad and even vague, and was thus open to abuse.

He said there was therefore need for some limitation of those powers, encouraging for there to be put in place specifics or transparent guidelines that could provide for such action to be taken.

MP Gaolathe also differed on the provision for the auditing of trusts accounts.

He argued that it was unnecessary to have all trusts accounts audited regardless of the size of the respective trusts to which they were tied, saying there should instead be a threshold below which trusts that did not entail high revenues or much resources did not need to be audited.

“Auditing is expensive. Not just auditing itself, even just basic preparation of accounts, I therefore do not see why we cannot set a threshold below which we allow trusts to continue business without the need to be audited,” he said.

The MP noted in addition that there had to be in place a clear path for recourse for those trusts that would feel unduly treated in the implementation of the law.

In his contribution, Mahalapye West legislator Mr Joseph Molefe concurred with colleagues who said the law would not only bring accountability to trusts but that it would also prevent acts of money laundering.

The MP said the law would also serve to restore public confidence in trusts particularly that some of them had kept people in the dark regarding their operations.

Mr Molefe however expressed discontent at the level of punishment that could be meted out for violating regulations.

He said at P20 000, the fines were low and would not act as a deterrent particularly that most trusts had hefty amounts of money running into millions.

Mr Moiseraele Goya said bill was indeed a good piece of legislation that would among others serve to bring about normalcy in the running of trusts and foundations.

He said one area in which the law would help was to help in guarding against the collapse of trusts due to mismanagement resulting from lack of regulation.

Mr Goya hoped also that the law would specify qualifications for one to manage or sit in boards of trustees.

Presenting the bill earlier, Minister Shaw Kgathi of Defence, Justice and Security had said there was currently no statutory law regulating the control of trusts in Botswana.

“This means that up to this time, there is minimal vetting and control of trusts and similar legal arrangement such as foundations in this country. To continue as a country without statutory law regulating and controlling trust property is to provide a possible money laundering stage on which illegal activities can be disguised through such legal arrangements,” he said.

The minister noted that while most trusts and similar entities were set up for legitimate and noble causes, research by the international financial organisations such as Financial Action Task Force (FATF) indicated that corporate vehicles such as trusts could and were being used intentionally or unintentionally for money laundering and terrorist financing activities.

Mr Kgathi noted that an environment such Botswana’s, where trusts and similar bodies were not subjected to accountability and transparency requirements could facilitate undesirable results. ENDS