By Jaco de Klerk – Director – Commercial
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During 2021 the Financial Action Task Force (the “FATF”) published a report outlining South Africa’s shortcomings in relation to the prevention of money laundering, terrorist financing and proliferation financing, which ultimately lead to our country’s greylisting.
The report by the FATF resulted in the enactment of the General Laws (Anti-Money Laundering and Combating Terrorism) Amendment Act 22 of 2022 (“Amendment Act”) during 2022. In turn, its promulgation forced an amendment of the Companies Act 71 of 2008 (the “Companies Act”). One of the notable amendments to the Companies Act, involves record keeping by companies of their “beneficial owners”, which is the focus point of this article.
In an attempt to combat money laundering and terrorism financing, companies are now required to keep record keeping of all the natural persons who control a company. This is done to enhance transparency, specifically for complex ownership structures of companies.
As a result of the amendment of the Companies Act Regulations (the “Regulations”), companies must now file its annual returns with the Companies and Intellectual Property Commission (“CIPC”) together with a copy of its securities register, the securities register must include a record of each beneficial owner of the company.
The Companies Act defines a “beneficial owner” as an individual who, directly or indirectly, ultimately owns that company or exercises effective control of that company. Although the definition is further qualified in section 1 of the Companies Act, the key words i.e. “owns” or “effective control” are not clearly defined, which might cause ambiguity in future.
Furthermore, the Regulations, which were published and came into effect on the 24th of May 2023, provides that:
- a company’s securities register must be kept up to date; and
- a company must as soon as practically possible, but no later than 10 (ten) business days after any change to the information in sub-regulation (1) and (2), update its securities register to reflect the changes.
A critical part of enforcement by the CIPC will be detection of subterfuge, where records are retained and filed dishonestly. We will have a table missing a leg if enforcement involves a tick box exercise, which is currently the case with, for example, the filing of annual returns with the CIPC.
While the government’s swift actions (albeit belated) to have South Africa removed from the greylist are laudable, the amendments will only serve their purpose if the responsible bodies (CIPC and the Master’s Office, for example) are equipped to detect and enforce.