As a result of South Africa’s grey listing and recommendations from the Financial Action Task Force (“FATF”), the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act (“the Amendment Act”) came into effect on 1 April 2023.
The Amendment Act imposes additional obligations on companies, trusts, and individuals to submit specified details on beneficial ownership to ensure law enforcement has timely access to accurate, up-to-date and verified information on who the ultimate owners of a legal entity are in order to mitigate the risks identified by the FATF where legal entities were identified as susceptible vehicles for exploitation in money laundering and terrorism financing activities.
The Companies and Intellectual Property Commission (“CIPC”) is in the process of implementing a Beneficial Ownership Register which will compel any individual who directly or indirectly has ultimate ownership of 5% or more of a company, or exercises effective control over it, to register their beneficial ownership through the CIPC. Both law enforcement and competent authorities will have access to this information.
Companies will be required to designate a member of the company in writing, to file beneficial ownership information on its behalf. The mandated individual will be required to file the companies Securities Register, Certified ID/passport copies (as applicable) of all recognised beneficial owners, as well as any other supporting documentation that the Commission may demand. To keep the Register accurate, companies are required to make annual filings confirming the validity of the information that they have filed.
Companies have until 1 October 2023 (6 months after 1 April 2023) to comply with this requirement and failure to do so will amount to non-compliance with the Companies Act 71 of 2008, as amended, which could result in a court ordered administrative fine of 10% of the non-complying companies’ turnover or R1 million, whichever is greater.
The Amendment Act also amends the Trust Property Control Act 57 of 1988, by requiring trustees (or a person who has power of attorney to act on behalf of the trustees) to register a record of all trustees, the founder and all named beneficiaries of the trust and report this information to the Master of the High Court where the trust is registered. The trustees are further required to store a record of this information together with copies of all recognised beneficial owners’ ID/passport documents (as applicable). Access to this information is restricted to various government bodies.
The objective of the Amendment Act concerning trusts is to establish a degree of transparency with regards to the ownership of trust assets prior to the transfer of such assets or their income to the beneficiaries.
The Master must keep an electronic register of the beneficial owners of all trusts. The Beneficial Ownership Register form and register can be accessed online and requires trustees to provide detailed information on the beneficial owners of trust assets. Where the beneficial owner is a minor, the same information must be provided for the legal guardian of the minor.
Trustees who do not comply with the above requirements may face a penalty of up to R10 million or imprisonment for a term of 5 years. Further, the Amendment Act grants the Masters’ offices the added authority to dismiss trustees who are deemed to have performed inadequately, declined a lawful request, have been found guilty of dishonesty, been sequestrated, declared mentally incapable, or failed to provide adequate security.
Although we have now established legislation to tackle money laundering, terrorist financing, and proliferation financing, in accordance with FATF recommendations, we have yet to fully exploit its potential and achieve measurable outcomes. To aid in removing South Africa from its grey listed status, it is essential to prioritise the aforementioned amendments and establish effective compliance frameworks within your organisation.