New Beneficial Ownership rules for companies and trusts
Introduction:
On April 1, 2023, the Anti-Money Laundering and Combatting of Terrorism Financing Amendment Act 22 of 2022 (referred to as the "Amendment Act") came into effect, bringing significant changes to the definition of 'beneficial ownership' in various laws affecting trusts and companies. This article aims to provide a deeper understanding of this new concept, introduced to enhance transparency and combat illicit financial activities in line with the recommendations of the Financial Action Task Force (FATF).
Combatting Money Laundering and Terrorism Financing:
The Amendment Act primarily targets trusts and companies that are commonly exploited for money laundering and terrorism financing. Recognizing their role as vehicles facilitating such activities, the Act aims to promote transparency in the ownership and control of these entities. The concept of 'beneficial ownership' has been introduced as a mechanism to achieve this objective, imposing additional disclosure and reporting requirements.
Changes to Trust Laws:
Sections 1 through 8 of the Amendment Act introduce amendments to the Trust Property Control Act 57 of 1988, which governs trusts in South Africa. Section 1 of the Amendment Act provides a broad definition of 'beneficial owner,' encompassing several categories such as the ultimate owners of trust property, individuals exercising control over trust administration, founders, trustees, and beneficiaries. Trustees are now mandated to establish and record beneficial ownership, maintain accurate information, and submit prescribed details to the relevant Master's Office. The Master will maintain a register of beneficial ownership information to assist enforcement agencies in detecting and identifying illicit trust activities.
Amendments to Company Laws:
Sections 55 through 60 of the Amendment Act introduce changes to the Companies Act, mirroring the approach taken for trusts. The emphasis remains on 'beneficial ownership' in companies and the responsibility to maintain records and report accurate information to the South African Companies and Intellectual Property Commission (CIPC). The new definition of 'beneficial owner' under section 55 encompasses individuals who directly or indirectly own a company, exercise control through voting rights, appoint or remove board members, hold interests in securities, or materially influence management. Section 56 amends section 33 of the Companies Act, empowering the CIPC to maintain up-to-date beneficial ownership information.
Compliance and Consequences:
All companies, except for "affected companies," are required to maintain records of natural persons with ownership or control over the company and submit this information to the CIPC within specified timelines. Failure to comply may result in business restrictions, reputational damage, and non-compliance with the Companies Act. In the case of trusts, non-compliance may lead to fines up to R10 million and possible imprisonment. It is crucial for trustees and company officers to familiarize themselves with the new reporting obligations and take necessary steps to ensure compliance.
Conclusion:
The newly introduced concept of 'beneficial ownership' under the Amendment Act signifies a significant step in combating money laundering and terrorism financing. Trustees and company officers should promptly adapt to the new reporting duties, ensuring accurate information is submitted to the appropriate authorities. Seeking professional assistance for understanding the requirements and managing reporting obligations is recommended. Stay updated with follow-up articles and online webinars that explore other areas affected by the Amendment Act and provide insights into these anti-money laundering amendments.
Disclaimer:
The views expressed in this article are those of the author(s) and do not necessarily reflect those of the firm. The content provided is for informational purposes only and should not be considered as an exhaustive explanation of the law. It is advised not to rely solely on this content and to seek confirmation from a legal advisor before taking any action. The firm and author(s) cannot be held liable for any consequences resulting from.
