South Africa urgently sets beneficial owner register start date amid FATF grey listing 

South Africa's Companies and Intellectual Property Commission has announced that compulsory registration of trust and company beneficial ownership will take effect on 1 April 2023, in an accelerated move following the country's grey listing by the Financial Action Task Force (FATF).

The new Act amends the regulation of beneficial ownership disclosure in terms of the Companies Act 71 of 2008 (the Companies Act), the Trust Property Control Act 57 of 1988, and the Financial Sector Regulation Act 9 of 2017. 

The amended sections 50 and 56 of the Companies Act mean that all unregulated companies will have to record and update beneficial ownership information in their own securities registers. 

Regulated companies must file the information directly with the Companies and Intellectual Property Commission, as well as maintain their own registers. 

Non-compliance could result in a court-ordered administrative fine of 10% of the entity's turnover or R1m, whichever is greater.

Moneywb.co.za reported that the registrar of companies said last week "As it stands, no record of company shareholders and beneficial owners is recorded by the CIPC. As such, the CIPC recognises its responsibility as one of the key role players in safeguarding the integrity of our regulatory environment in South Africa and [is] integrally placed to manage the risks associated with money laundering, proliferation and terror financing activities." 

CIPC Commissioner Advocate Rory Voller said: "With the promulgation of the applicable regulations, the CIPC will implement the BO register and support the relevant stakeholders in mitigating against deficiencies identified by the FATF, and to help expedite the country's exit from the grey list." 

In a briefing note on 3 March by Eversheds Sutherland partner Andrew Davidson, he commented that FATF had 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.'"

He continued; "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 beneficial ownership 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, he further said. 

The Act amends section 50 of the Companies Act to require companies that are not ‘affected companies' to record and update information pertaining to beneficial ownership in its securities register, and section 56 to require ‘affected companies' to record and update prescribed information pertaining to beneficial ownership with CIPC. 

The Commissioner of CIPC announced on 25 February 2023 that CIPC will be implementing a register of beneficial owners 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 R1m.

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 five years, or both.

The Financial Sector Regulation Act is amended by, inter alia, the insertion of chapter 11A governing beneficial ownership, 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.