With the rise of criminal activities such as money laundering, it is crucial for businesses to implement measures that mitigate the risks associated with such crimes. The national risk assessment has identified legal persons as vehicles that are particularly prone to abuse for money laundering and terrorist financing activities.
In response to these concerns, the Companies and Intellectual Property Commission (CIPC) launched its Beneficial Ownership (BO) Register for companies and close corporations on 1 April 2023. The primary objective of establishing this BO register is to maintain a record of natural persons who own or exercise control over legal entities.
This will assist law enforcement in their investigations regarding the ultimate owners of entities and help mitigate the risks identified in the national risk assessment.
Who is a Beneficial Owner?
For the purposes of submitting information to the beneficial ownership register with CIPC, a beneficial owner is defined as an individual who, directly or indirectly, ultimately owns or exercises effective control over a company.
To be considered a beneficial owner, an individual must hold at least 5% or more of the voting rights or beneficial interest in that company. Therefore, individuals holding less than 5% beneficial ownership or control are not required to be declared as beneficial owners.
Entities Required to File Beneficial Ownership
The following entities are required to submit beneficial ownership information:
- Private Companies
- Non-Profit Companies
- External Companies
- Close Corporations
It is important to note that trusts are not permitted to submit beneficial ownership information.
Submission Process and Compliance
Moving forward, the submission of beneficial ownership information must be made together with the annual return on the CIPC website. Companies that fail to comply with this requirement will incur an administrative fee. This penalty also applies in cases of falsified disclosures.
Conclusion
Compliance with the beneficial ownership regulations is vital for entities aiming to mitigate the risks associated with criminal activities. Adhering to these regulations not only helps in preventing abuse but also safeguards companies from penalties related to non-compliance.
As the landscape of financial crime evolves, proactive measures such as maintaining accurate beneficial ownership records will play a crucial role in enhancing transparency and accountability within the corporate sector.
