From CompliNEWS | Financial Services Intelligence Watch

Draft Joint Standard on beneficial ownership: Time to comment is running out

Financial institutions have until 25 September 2026 to comment on the Prudential Authority and FSCA’s draft Joint Standard on beneficial ownership, a proposal that could materially change how regulated firms identify, verify, assess and report the individuals who ultimately own or control them.

The draft Standard is intended to strengthen transparency across the financial sector by introducing clearer requirements around beneficial ownership, including governance arrangements, ongoing identification and verification, fit and proper assessments focused on honesty and integrity, and regulatory notification when beneficial ownership changes. While certain holdings through listed securities, pension funds, collective investment schemes and employee share schemes are excluded in defined circumstances, the overall direction is towards significantly greater scrutiny of ownership structures and the people behind them.

For many institutions, the policy rationale will be difficult to argue with. South Africa remains under pressure to strengthen the transparency of legal persons and ownership structures, and the Authorities clearly see stronger beneficial ownership controls as an important part of the fight against financial crime. The draft Standard would also clarify concepts such as ‘ultimate ownership’ and ‘effective control’, which have not always been applied consistently across different parts of the regulatory framework. In addition, prospective beneficial owners would effectively be brought within an honesty and integrity assessment framework, while financial institutions would need to provide beneficial ownership information when applying for licences or authorisations and notify the Authorities of new, potential or departing beneficial owners within 30 calendar days.

The concern is not so much the objective as the practical burden of implementation. Smaller FSPs in particular may find themselves required to maintain a level of ongoing ownership verification, governance documentation and regulatory reporting that is disproportionate to their scale and risk profile. There is also a real risk of duplication. Financial institutions already deal with beneficial ownership requirements through CIPC, FICA, licensing processes and internal governance frameworks, and the industry should consider whether the draft Standard could result in the same ownership information being collected, verified and reported multiple times in different formats. Complex structures involving trusts, holding companies, nominees or offshore shareholders may present further difficulty, particularly where determining ‘effective contro’ requires judgement rather than a simple percentage ownership test.

The proposed honesty and integrity requirements also deserve careful consideration. In principle, regulators should know whether persons exercising meaningful ownership or control over a financial institution present governance or misconduct concerns. The difficulty will lie in determining how far institutions are expected to investigate, what evidence will be sufficient, how passive or minority beneficial owners should be treated, and what happens where information is incomplete, disputed or held across multiple jurisdictions. The 30-day notification period may also prove challenging in structures where changes in ownership or control are not immediately apparent to the regulated entity. These are precisely the kinds of operational issues that should be raised now, before the Standard is finalised.

The consultation process therefore gives financial institutions an important opportunity to shape the eventual framework. Firms should consider whether the draft requirements are workable in their own ownership structures, whether the compliance costs are proportionate, whether there is unnecessary duplication with existing reporting obligations, and whether transitional arrangements will be needed. Particular attention should be given to smaller firms, group structures, trusts, offshore ownership and the interaction between regulatory reporting systems. The Authorities have specifically invited both qualitative and quantitative feedback, including information on likely cost and administrative impact.

Comments on the draft Joint Standard must be submitted by 25 September 2026 using the prescribed consultation template. Institutions that may be affected should use the remaining period to review the proposals carefully and provide practical input while the opportunity remains open. The final Standard is likely to have a lasting impact on ownership governance across the financial sector, and this is the stage at which concerns around proportionality, duplication and implementation can still meaningfully influence the outcome.