Uncovering hidden interests: CIPC launches beneficial ownership registry

Feb 8, 2024 3:24:21 PM

"In effort to bring more transparency and accountability, organisations - whether they be profit-making, NPOs or even non-exempt SOEs - are now obliged to file beneficial ownership information with the Companies and Intellectual Property Commission (CIPC) as part of their annual returns to avoid de-registration."

A group of business people in a board meeting

By Koketso Mamabolo & Jessie Taylor

South Africa’s greylisting by the Financial Action Task Force (FATF) in 2022 sparked a wave of ongoing reforms aimed at strengthening the country’s anti-money laundering and counter-terrorist financing policies and mechanisms. One of these is an amendment of the Companies Act 71 of 2008, which came into effect in April last year with far-reaching implications.

In effort to bring more transparency and accountability, organisations - whether they be profit-making, NPOs or even non-exempt SOEs - are now obliged to file beneficial ownership information with the Companies and Intellectual Property Commission (CIPC) as part of their annual returns to avoid de-registration.

“Companies and close corporations are required to file Beneficial Ownership Information within 10 business days of its registration, and thereafter as and when such changes occur, but at least once a year with its Annual Return filing,” reads the CIPC’s Notice 67 of 2023.

In an effort to reduce the likelihood of people holding hidden interests, and to assist law enforcement agencies in their investigations, the CIPC is keeping a record of all people with control over legal entities. “The new regulations empowers [sic] government bodies such as SARS to go through your ownership structures with a fine tooth comb and take you to task,” explains Company Partners, which offers organisations assistance with company registration.

“Before these new regulations, companies were not required to disclose their Beneficial Ownership or shareholding information to entities like the CIPC. These issues were treated as confidential matters and were managed internally by the company through its share register, shareholder agreements and the like.”

For both a PTY and a close corporation, anyone holding 5% or more of the shares is considered a beneficial owner. But what is a beneficial owner? According to Company Partners: “A Beneficial owner in respect of a company, means an individual who, directly or indirectly, ultimately owns that company or exercises effective control of that company.”

The FATF report found that South Africa scored poorly in several areas, including identifying terrorism financing and reporting on suspicious transactions. Following the report, cabinet established an intergovernmental task team to deal with the identified weaknesses and ensure greater collaboration between law enforcement agencies.

The FATF is an international body developing policies to combat money laundering and other financial crimes. The organisation is the global money laundering and terrorist financing watchdog. As an inter-governmental body, the FATF sets the international standards for preventing financial crimes and other illegal activities.

South Africa is particularly at risk for financial crime due to its position as a regional financial hub for sub-Saharan Africa - particularly for the laundering of both domestic and foreign crime proceeds and terrorism financing.

The widespread use of cash is a high risk for money laundering and terrorist financing, including across borders. More than half of South Africa’s transactions still take place in cash. Detecting and recovering cash proceeds of crime remains a challenge for local law enforcement.

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Sources: CIPC | Company Partners