New regulations introduced by the Companies and Intellectual Property Commission (CIPC) that require banks to disclose information regarding beneficial ownership mean that opening a business account can take longer than entrepreneurs expect.
This is because, according to the new regulations, banks must comply by verifying information regarding businesses and individuals who own these businesses.
For instance, banks must comply with the Financial Intelligence Centre Act (FICA), which was passed to prevent money laundering, financing of terrorism and other unlawful practices.
FICA states that banks should verify the identity of businesses and individuals that own them. This includes verification of identification documents, proof of address, as well as detailed information about directors or beneficial owners.
Treasury also requires banks to know their clients as well as their clients’ ownership and control structures and to know their ultimate beneficial owners.
Companies required to provide information
The CIPC has since required all companies to provide information on their beneficial ownership as part of their compliance requirements.
Since April 1, 2024, the CIPC system does not permit companies to submit their annual returns if the beneficial ownership information is not complete and up to date. This is because companies that fail to comply are considered non-compliant, which banks perceive as a risk and may cause delays or rejections when opening accounts.
The Commissioner of the CIPC, Adv. Rory Voller, emphasized that the implementation of these requirements aims to ensure transparency and integrity and boost investor confidence in South Africa.
CIPC warns that non-compliance will attract severe consequences.
“Non-compliance with the deadlines for the provision of information regarding the beneficial ownership will attract de-registration, fines, and enforcement notices. These measures will completely stop banking activities and banks will not open accounts with companies that have not complied or do not have complete information regarding the beneficial ownership.”
FICA requires banks to do verification
According to Hawken McEwan, Director of Risk and Compliance at nCino KYC Africa, FICA regulations now requires banks and other accountable institutions to perform ultimate beneficial owner (UBO) identification and verification. He further explained that a recent guidance even proposes reducing the threshold for ownership from 25% to as low as 5%.
The emphasis on increased transparency and the ability to understand the ultimate beneficial owners is evident. “Identifying beneficial owners isn’t just an administrative task, it’s central to preventing sophisticated financial crime and protecting the integrity of the financial system,” said McEwan.
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