South Africa: FIC Act Requires Beneficial Ownership Verification for Accountable Institutions

• South Africa has introduced reforms on beneficial ownership transparency to align with global standards.
• Accountable institutions must establish the identity of beneficial owners and take reasonable steps to verify their identities.
• Beneficial owners are natural persons with controlling ownership interests or effective control over legal persons.
• FATF recommendations 24 and 25 detail the international standard for beneficial ownership controls.

The Financial Intelligence Centre Act (FIC Act) requires accountable institutions to identify beneficial owners, who are natural persons with controlling ownership interests or effective control over legal persons.

In its 2019 mutual evaluation report, the Financial Action Task Force (FATF) highlighted South Africa's need for enhanced beneficial ownership controls to combat money laundering and terrorist financing. The country has since introduced reforms on beneficial ownership transparency to align with global standards. As a result, accountable institutions listed under Schedule 1 of the Financial Intelligence Centre Act (FIC Act) must establish the identity of beneficial owners and take reasonable steps to verify their identities. This requirement is set out in section 21B of the FIC Act and explained in public compliance communication 59.

The Financial Intelligence Centre Act (FIC Act) requires accountable institutions to identify beneficial owners, who are natural persons with controlling ownership interests or effective control over legal persons. This is in line with FATF recommendations 24 and 25, which detail the international standard for beneficial ownership controls. Accountable institutions must comply with these obligations when dealing with clients who are legal persons, trusts, or partnerships. They must gain an understanding of the client's business, ownership structure, and control mechanisms to identify potential money laundering risks.

The beneficial ownership requirements set out in section 21B of the FIC Act are crucial for preventing money laundering and countering terrorist financing. Accountable institutions must ensure their clients' institutions comply with these obligations, including identifying natural persons who hold controlling ownership interests or exercise effective control over legal persons. This requires a thorough understanding of the client's business and ownership structure, as well as regular customer due diligence to identify potential risks.

Lawyers and compliance officers in South Africa should ensure their clients' institutions are complying with the beneficial ownership requirements set out in section 21B of the FIC Act, including identifying natural persons who hold controlling ownership interests or exercise effective control over legal persons.

Source: Original reporting via South African regulatory sources