Beneficial-Ownership-Regulations-are-Strengthened-to-Address-FATFs-Grey-Listing

As of 01 April 2023, changes pertaining to beneficial ownership that were introduced by the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act, No. 22 of 2022 will come into effect.

The introduction of changes by the General Laws came in response to the country’s grey listing by the Financial Action Task Force (FATF) on 24 February 2023. The move was triggered by South Africa’s shortfall in fulfilling the 11 recommendations made by the FATF in 2019, which sought to prevent and combat terrorism financing and money laundering.

Read more:

https://legal.sabinet.co.za/articles/anti-money-laundering-and-combating-of-terror-financing-acts-under-the-spotlight/

One of these deficiencies pertains to Beneficial Ownership and the need for relevant authorities to access Beneficial Ownership records, as well as to identify and penalise violations in 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 Amendment Act, agreed to on 29 December 2022, aims to address the areas highlighted in FATF’s mutual evaluation report. This legislation amends various acts, including the Companies Act 71 of 2008, the Trust Property Control Act 57 of 1988, and the Financial Sector Regulation Act 9 of 2017, particularly with respect to the regulation of Beneficial Ownership.

To maintain accurate and up-to-date Beneficial Ownership information, the amendments to the Companies Act establish a comprehensive mechanism involving the Companies and Intellectual Property Commission (CIPC). The Act modifies section 50 of the Companies Act, mandating companies that are not ‘affected companies’ to record and update Beneficial Ownership information in their securities register. Furthermore, section 56 requires ‘affected companies’ to record and update prescribed information related to Beneficial Ownership with the CIPC. The Commissioner of CIPC announced on 25 February 2023 that the CIPC will implement a Beneficial Ownership register starting 1 April 2023. Non-compliance with the Companies Act, such as failing to register the prescribed information, may result in a court-ordered administrative fine not exceeding the greater of 10% of the respondent’s turnover during the non-compliance period and R1 million.

The Amendment Act also modifies the Trust Property Control Act 57 of 1988, requiring the Master to maintain a register and provide access to information regarding Beneficial Ownership. It also introduces section 11A(1), which requires trustees, among other duties, to lodge a register containing the prescribed information related to beneficial owners of trusts with the Master. Failure to comply constitutes an offense punishable by a fine not exceeding R10 million, imprisonment not exceeding five years, or both.

The Financial Sector Regulation Act is also amended with the inclusion of Chapter 11A, which governs Beneficial Ownership. This chapter empowers financial sector regulators to create standards applicable to beneficial owners, with respect to reporting relevant Beneficial Ownership information to the financial sector regulator.

Considering these amendments, it is vital for all relevant individuals to familiarise themselves with the contents of the amendments and ensure the proper reporting of the required information. Compliance with the new regulations will help South Africa address its strategic deficiencies and work towards removal from FATF’s grey list.

For up-to-date and consolidated legislation visit sabinet.co.za for more information on how Sabinet can assist you with your legal information requirements.

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