A group within the government is working on the creation of a national, integrated and harmonised registry of beneficial ownership that will provide an overall picture of what is owned by whom.
Beneficial ownership refers to the direct or indirect ownership of an asset or legal entity, and which confers effective control over it.
Such an integrated data system — as envisaged by the government — is aimed at improving the access by law-enforcement agencies to beneficial ownership information in its fight against financial crimes.
The national system will link the data on the beneficial ownership of trusts in registries held by the Master’s offices throughout the country with the beneficial ownership registry of the Companies and Intellectual Property Commission (CIPC) and the register of directors of specified nonprofit organisations.
These registries will be created once the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Bill becomes law.
The bill is aimed at strengthening SA’s regime on beneficial ownership which the Financial Action Task Force (FATF) found to be deficient.
FATF is an international body that sets standards for anti-money laundering and the combating of terrorism financing regimes and acts as a watchdog over them.
It has found SA’s systems fall short of international standards and unless this is remedied before its February meeting, FATF will greylist SA which will have serious consequences for the economy and particularly the financial sector.
In a meeting of parliament’s finance committee last week to deal with the treasury’s initial response to public submissions on the bill, Financial Intelligence Centre (FIC) executive manager for compliance and prevention Christopher Malan said a government working group on beneficial ownership consisting of the FIC, department of public service and administration, the CIPC, Master’s offices and Sars was working on the design of a framework for a national beneficial ownership registry which would consist of two tiers.
Tier one would comprise a corporate and legal persons business ownership register held by CIPC, supported by a beneficial ownership trust register held under the various provincial offices of the Masters of the High Court, which would be linked to the CIPC. The data of the two registers would be digitally connected and integrated by way of a common data standard.
The second tier would consist of the registries of government agencies that use the data of tier one and would electronically replicate it in their own registries. This will create an important link of assets (for example, properties held by individuals and entities in the various deeds offices) to the beneficial ownership data held in the registries.
“We are also looking at other registries that hold assets that would form part of the network,” Malan told MPs. “Most importantly Sars would be a key and critical repository as Sars requires all this information particularly of natural persons linked to assets for tax collection purposes.
“This mechanism being proposed should provide a multipronged, risk-based approach for effective implementation of the beneficial ownership transparency of legal persons and trust data registries within government agencies including Sars. This is in line with the latest FATF standard.”
Malan said a common data standard would be used in the registries to ensure that the data was interoperable.
He noted that the CIPC was more advanced from a digital data infrastructure perspective compared to the provincial Master’s Offices which was in need of a “serious overall”. Sars and the FIC had assessed the trust data kept digitally in or accessible by the Masters’ Office and found substantial deficiencies which needed to be urgently enhanced to provide more meaningful trust data to them.
“The CIPC would be able to more easily transition its ICT infrastructure to a beneficial ownership registry platform, as it currently does largely verify its basic data. It could take on the verification of beneficial ownership data to meet the FATF standard of accuracy and up to date information.”
Malan said the request by civil society for public access to the registries would have to await broader consultation.
Cosatu, amaBhungane Centre for Investigative Journalism and Corruption Watch told the committee that the bill needed to provide for public access to the registries as that would help in exposing corruption and financial crimes, which were so prevalent during the years of state capture.
Treasury director of fiscal and intergovernmental legislation Jeannine Bednar-Giyose said the question of access to the various registers would be dealt with in regulations. “The question of open access to the public is left by FATF to countries to decide. This decision has not yet been made as it requires full consultation with all stakeholders.”
Bednar-Giyose also said that further consideration would be given to allowing mandatory public access to companies’ securities registers but noted that this could be “potentially addressed during the Companies Amendment Bill process that will be undertaken by the department of trade industry and competition”.
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