From CompliNEWS | Financial Service Intelligence Watch

The impending legislative adjustments within South Africa mark a pivotal juncture for companies to align with international transparency standards and address substantial gaps in the nation’s AML/CFT regulations, as highlighted by the Financial Action Task Force (FATF). While these amendments signify progress towards heightened responsibility, their ultimate efficacy hinges on rigorous implementation and vigilant oversight.

This development arises in the wake of FATF’s evaluation of South Africa’s legal framework against money laundering and terrorist financing. An area of particular concern centered around the misuse of intricate corporate structures for illicit activities, prompting the call for improved accessibility of beneficial ownership information. Consequently, the South African government enacted the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act 22 of 2022 (GLAA).

The GLAA aims to amplify transparency and simplify the identification of natural persons who ultimately possess or oversee trusts and companies. It mandates the Master to uphold a registry of beneficial ownership for trusts under the revised Trust Property Control Act of 1988, while demanding that the Companies and Intellectual Property Commission (CIPC) maintain up-to-date data regarding companies’ beneficial ownership in accordance with the amended Companies Act of 2008.

Pursuant to the GLAA, trustees and companies are compelled to uphold a comprehensive information repository detailing their beneficial proprietors, with trustees obligated to annually submit and upload this data onto the ‘Beneficial Owners Registry’. Non-compliance could yield substantial penalties, including fines of up to R10 million and/or imprisonment for trustees lasting up to five years.

However, the effectiveness of these measures hinges on the precise interpretation of ‘beneficial owner’ and ‘control’, and their pragmatic application can diverge based on individual circumstances. Additionally, scenarios such as broad-based employee incentive programs introduce complexities; it’s suggested that beneficiaries without vested rights to trust assets might not be classified as beneficial owners. Meanwhile, the broader definition of ‘control’ in the Companies Act could lead to potential variations in application.

While these changes theoretically address FATF’s concerns, their successful execution pivots on vigilant governmental oversight and robust enforcement. Despite FATF’s decision to place South Africa on the greylist creating challenges, it could potentially stimulate reform, particularly amid broader obstacles such as subdued growth projections, the Eskom crisis, and ongoing governmental corruption.

Companies are now tasked with embracing this opportunity and submitting their beneficial ownership details to the CIPC before 1 October 2023. Amidst the turbulence, these legislative modifications offer a ray of optimism for heightened transparency and accountability within South Africa’s corporate realm – essential components in combating financial wrongdoing and nurturing a more resilient economy.