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Staff Writer | 18 June 2023

To escape the Financial Action Task Force (FATF) greylisting, the Companies and Intellectual Property Commission (CIPC) will amend the Companies Act to reveal the names of beneficial owners of companies in South Africa, reported the Sunday Times.

This critical step towards South Africa’s removal from the FATF greylist was among the eight areas of strategic deficiencies identified by the FATF that required South Africa to address.

According to the minister of Trade, Industry and Competition, Ebrahim Patel, a CIPC report on monitoring beneficial ownership and the amendments to the Companies Act to enable this will go to parliament this month.

Among its critical recommendations, the FATF noted that South Africa needed to “ensure that competent authorities have timely access to accurate and up-to-date Beneficial Ownership (BO) information on legal persons and arrangements and applying sanctions for breaches of violation by legal persons to BO obligations”.

The Financial Intelligence Centre Act (FICA) defines a beneficial owner as a natural person who, directly or indirectly, owns or controls the client of an accountable institution or legal person/trust/partnership that controls the client of an accountable institution or controls a client on whose behalf a transition is being conducted.

Patel said that the data on the beneficial ownership register is for all entity types where ownership of a person is 5% or more, and companies would be obliged to collect this information. At the same time, the CIPC will have to maintain a register for law-enforcement agencies to retrieve when pursuing cases of money laundering, terror financing and proliferation.

“The regulations will strengthen the fight against corruption and improve the integrity of South Africa’s financial system,” He said.

However, According to its latest Economic Outlook report for South Africa, PwC said that, while the greylisting was for a good reason, the hoops South Africa would have to jump through to be removed from the list would raise the cost of financing and trading with global partners for companies based in South Africa.

The greylisting and its recommendations could lead to additional funding source requirements for businesses and NGOs, which would increase costs and delay transaction execution, the group warned.

As a result, private companies need context-specific solutions to circumvent the aspects of the greylisting such as strategic expansion, capital raising, and any generally increased cost of doing business, said PwC.

Nevertheless, Patel noted that the cabinet was processing the amendments to the Companies Act.

The National Treasury has indicated that the government is expected to address these deficiencies by no later than the end of January 2025.

‘Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER’.


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