The Trust Act 2020 of Pakistan was introduced to modernize and strengthen the legal framework governing trusts, addressing limitations in the colonial-era Trust Act of 1882. This legislative update was partly
in response to recommendations by the Financial Action Task Force (FATF) to combat money laundering and terrorist financing.
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Salient Features of the Trust Act 2020:
- Mandatory Registration: All trusts, encompassing both movable and immovable properties, are required to register with the relevant authorities. This ensures transparency and facilitates regulatory oversight.
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- Inclusion of Juristic Persons: The Act permits any person, including juristic entities such as corporate bodies, to establish trusts. This broadens the scope beyond natural persons, allowing organizations to create trusts under their official seals.
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- Introduction of Specialized Trusts: The legislation defines and recognizes specialized trusts, including pension funds, provident funds, gratuity funds, superannuation funds, and employee benefit trusts. This categorization provides clarity and ensures appropriate regulatory oversight for various trust types.
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- Enhanced Regulatory Oversight: The Act establishes dedicated authorities, such as the Trust Registration Authority (TRA), responsible for maintaining trust registers, examining trust documents, and monitoring compliance. This framework aims to prevent fraudulent activities and resolve trust-related disputes effectively.
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- Alignment with Anti-Money Laundering Measures: In line with FATF recommendations, the Act incorporates provisions to prevent the misuse of trusts for money laundering and terrorist financing. This includes stringent registration processes and the requirement for trustees to provide comprehensive information about the trust's purpose, assets, and beneficiaries.
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Key Differences from the Trust Act 1882:
- Scope of Applicability: The Trust Act 1882 primarily dealt with private trusts and was limited in addressing modern financial complexities. The Trust Act 2020 expands its applicability to include both private and public trusts, as well as specialized trusts, ensuring a more comprehensive legal framework.
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- Regulatory Mechanisms: The earlier Act lacked robust mechanisms for oversight and enforcement. The 2020 Act introduces structured regulatory bodies like the TRA, enhancing accountability and governance within the trust sector.
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- Anti-Money Laundering Compliance: The 1882 Act did not address issues related to money laundering or terrorist financing. The 2020 legislation incorporates specific measures to align with international standards, reflecting Pakistan's commitment to global financial security protocols.
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In summary, the Trust Act 2020 represents a significant evolution in Pakistan's trust law, introducing comprehensive reforms to ensure transparency, accountability, and alignment with international standards, thereby addressing the deficiencies of the Trust Act 1882.
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