Crackdown on businesses with ‘hidden’ owners in South Africa

The Financial Intelligence Centre (FIC) says that changes to the country’s beneficial ownership framework will enhance the transparency of businesses – making them less attractive to criminals.

Xolisile Khanyile, the director of the FIC, during a collaboration workshop with the UN’s Southern Africa Office of Drugs and Crime, spoke on tools and methods to access beneficial ownership data during investigations into suspicious corporate activities.

The FIC now plans to revamp the system at which trusts, companies, partnerships can be investigated as it relates to who is involved in such corporate vehicles or has a stake in the said business, for example.

“Access by authorised recipients to beneficial ownership information would significantly aid efforts to protect and safeguard the financial system from illicit use,” Khanyile said.

He said that understanding the legal and beneficial ownership of corporate vehicles can play an integral part in assisting competent authorities, particularly law enforcement and the FIC.

Through assessing the beneficial ownership, people involved in criminal activity at arm’s length through companies or trusts could be uncovered.

A beneficial ownership framework is a set of regulations, policies, and procedures designed to identify the true owners of an entity or asset. These policies require companies to offer up information about their beneficial owners.

Beneficial owners refer to either a person or group that ultimately has control or ownership over a financial institution regardless of whether their name is what the company is registered under.

Khanyile said that bringing South Africa’s investigative powers regarding beneficial ownership in line with international standards would impede illicit actors’ ability to use legal entities to conceal proceeds from criminal acts.

The Financial Action Task Force (FATF) has recently strengthened its standards on beneficial ownership of legal persons to improve prevention and deterrence of the issues of legal persons, said the FIC.

As a result, law enforcement agencies across the globe must ensure they have all the necessary power to obtain beneficial ownership information from companies.

The FATF is the international watchdog that recently greylisted South Africa for its subpar regulations covering money laundering and other financial crimes.

South Africa’s beneficial ownership framework faced scrutiny from the FATF, it was found to lack the ability to have timeous access to accurate and adequate beneficial ownership information, said the FIC.

According to the FIC, the recently enacted General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act (General Laws Amendment Act) has introduced several changes to the beneficial ownership framework.

Definitions of a beneficial owner have now, through amendment, been added to multiple functional pieces of legislation to bring the concept f beneficial ownership in line with international standards.

The country’s Companies and Intellectual Property Commission, which administers roughly 2.1 million companies, announced this month that it plans to establish a register of beneficial owners.

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