Registering beneficial ownership following South Africa’s grey listing

16 Mar 2023

The General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act, No. 22 of 2022 places new obligations on Companies and other persons to register prescribed information regarding beneficial ownership following South Africa’s grey listing and recommendations made by the Financial Action Task Force.

The Financial Action Task Force (FATF) placed South Africa on its ‘Grey List’ on 24 February 2023 following the country’s failure to meet the FATF’s 11 recommendations to prevent and combat financing of terrorism and money laundering made in 2019. At a meeting earlier this year, the FATF notified South Africa of eight areas of strategic deficiency which the country is to address by the end of January 2025.

One of these areas involves Beneficial Ownership (BO) and the need for relevant authorities to have access to BO records as well as the opportunity to identify and sanction violations of BO obligations by beneficial owners. The FATF’s Guide on Transparency and Beneficial Ownership defines beneficial owners as ‘the natural person(s) who ultimately owns or controls a customer and/or the natural person on whose behalf a transaction is being conducted. It also includes those persons who exercise ultimate effective control over a legal person or arrangement.’

The General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act, No. 22 of 2022 (the Act) was assented to on 29 December 2022 with the view of addressing deficient areas identified in FATF’s mutual evaluation report. The Act amends, among other things, the regulation of BO in terms of the Companies Act 71 of 2008, the Trust Property Control Act 57 of 1988, and the Financial Sector Regulation Act 9 of 2017.

The relevant amendments to the Companies Act envision a comprehensive mechanism through which the Companies and Intellectual Property Commission (CIPC) can keep accurate and updated BO information. The Act amends section 50 of the Companies Act to require companies that are not ‘affected companies’ to record and update information pertaining to BO in its securities register, and section 56 to require ‘affected companies’ to record and update prescribed information pertaining to BO with CIPC. The Commissioner of CIPC announced on 25 February 2023 that CIPC will be implementing a register of BO on 1 April 2023. The failure to register this prescribed information will amount to non-compliance with the Companies Act, which could result in a court ordered administrative fine not exceeding the greater of 10% of the respondent’s turnover during the period of non-compliance and R1 million.

The Act amends the Trust Property Control Act 57 of 1988 by requiring the Master to maintain a register, and provide access to, information regarding BO and provides for the insertion of section 11A(1), requiring trustees to, inter alia, lodge a register of the prescribed information relating to beneficial owners of trusts with the Master. Failure to do so will constitute an offence punishable by a fine not exceeding R10 million, imprisonment not exceeding 5 years, or both.

The Financial Sector Regulation Act is amended by, inter alia, the insertion of chapter 11A governing BO, which provides that financial sector regulators are empowered to create standards applicable to beneficial owners, with respect to reporting of relevant information regarding BO to the financial sector regulator.

In light of the above amendments, it is crucial that all relevant persons are familiar with their contents and the required reporting of relevant information.

The full text of the Act can be accessed via this link.

Article sourced from Eversheds Sutherland.

See also:

• General Laws Amendment Act ­– Is your company prepared?
• The high cost of FICA non-compliance
• The Companies Amendment Bill, 2021 for public comment
• Types of trusts in SA and the advantages of setting one up

(This article is provided for informational purposes only and not for the purpose of providing legal advice. For more information on the topic, please contact the author/s or the relevant provider.)