Anti-Money Laundering and the "Beneficial Ownership" Amendments to South Africa's Companies Act 71 of 2008

Abstract

The "beneficial ownership" (BO) amendments to the Companies Act 71 of 2008 (the Companies Act 2008) were introduced in response to requirements set by the Financial Action Task Force (FATF). These amendments are just one part of a broader anti-money laundering (AML) framework introduced by South Africa in response to the country's much publicised recent "grey listing" by FATF. The amendments aim to provide useful information to law enforcement agencies about the natural persons that are the beneficial owners of companies. The South African AML legislative regime is comprehensive but lacks implementation and investigative skills largely due to the lack of expertise in money laundering detection in law enforcement agencies. Unfortunately, the amendments suffer from several defects as identified in this article. The definitions of "affected company" and "beneficial owner" are critiqued. In addition, the authors argue that the failure to create a criminal offence for failing to disclose BO information is a weakness in the Companies Act 2008's AML efforts. The impact of these disclosure obligations on small to medium enterprises is discussed and it is argued that the increased administrative burden and potential compliance costs need to be justified by a likelihood that the amendments will be effective in curbing money laundering in South Africa.