Beni-fishy-al ownership: Exclusive CIPC Commissioner interview

In an exclusive interview, CIPC commissioner Rory Voller breaks down the newly enacted beneficial ownership register for companies and what it means for accountants. 

Key takeaways 

• Regulations for beneficial ownership submissions will be finalised in the next few weeks, but CIPC Commisioner doesn’t’ expect significant changes to the draft regulations. 

• Register won’t be publically available. 

• CIPC is setting up a specialised unit to analyse the data against other government databases in search of red flags. 

• The registry won’t address the core greylisting shortcoming of enforcement and prosecutions.  

When experts noted there may be a silver lining to South Africa’s greylisting earlier this year, they were likely referring to setting up a beneficial ownership register. 

A report by Corruption Watch on Beneficial Ownership lists it’s benefits, referring to the Steinhoff heist stating, “. . .secrecy around the ownership of the companies with which Steinhoff was dealing was an essential part of hiding this financial crime. If the natural persons owning and controlling these companies had been publicly known, it would have been significantly harder for the perpetrators of this corruption to keep it hidden for as long as they did.”

So when the changes to the Companies Act came into effect on the first of April, establishing a beneficial ownership registry managed by the CIPC, it was worth asking Commissioner Rory Voller to explain its intricacies. 

How the CIPC will be using the Beneficial Ownership data 

Voller says that the CIPC will be building business intelligence capabilities to mine the new beneficial ownership data.

“I’ve created a fully-fledged beneficial ownership wing and division within the CIPC. I’ve taken staff from other areas and created this 10 or 15 person unit that’s going to be doing a lot of risk based approach analysis of the data that comes in,” says Voller.

The process starts with the registration of beneficial owners, where details are validated against a Home Affairs database. This isn’t the only external data source used or government entity involved.

“When we receive beneficial ownership data, we pass it to SARS, FIC, Masters (of High Court) Office, FSCA, etc. And we look for anomalies contained within those registers that keep similar types of information,” says Voller.

“Then we will pick out (based on a) risk-based approach and deal with those higher purpose entities that have a greater risk of money laundering and that pose a risk to our standard and our greylisting process.”

Voller says this increase in capacity won’t come with an increase in costs as the CIPC currently makes more money than it needs on an annual basis.

Currently, beneficial ownership submissions are voluntary while draft regulations are finalised. Voller expects gazetted regulations in the next few weeks. 

The database won’t be publically accessible

“At this particular time, there will not be general public access,” says Voller. “What is required in terms of the Financial Action Task Force standard related to beneficial ownership is that it must be fully disclosed to law enforcement and competent authorities, those of fellow regulators like SARS, Master’s Office.FIC, FSCA and the like.” 

“The one thing that we must also guard against right is this issue about privacy and confidentiality versus the use of corporate vehicles for fraudulent purposes and who ultimately owns those vehicles.”

The Corruption Watch report notes that there isn’t a universal approach to whether a register is only available to government agencies or publically available. However, the trend is towards more transparency. Voller notes that the access aspect may change in the future. 

Accountants are crucial

“Accountants, lawyers, bankers, they have a key role because they know who the beneficial owners are,” says Voller. “Accountants play a key role in ensuring full disclosure by entities because they provide assurance services and play a key role in the value chain of submitting that information to us.”

“They are on the front line of providing that particular assurance.”

There is a separate beneficial ownership register for trusts

At the core of the beneficial ownership process is the concept of establishing who the warm bodies behind any given company. Companies are required to submit a document that sets out the ownership structure of their entity. 

However, if the ultimate beneficial owner lies behind a trust structure, that information will lie with the Master of the High Courts, which is establishing it’s own beneficial ownership register for trusts. 

The register doesn’t solve the biggest greylisting issue 

“The biggest issue that FATF had was the lack of enforcement action,” says Voller.

He points out that most the issues initially raised by FATF were addressed. However, the majority of the unaddressed issues relate to enforcement. 

“If I can put it like that, you won’t even see the beneficial ownership register being mentioned as a stumbling block to us trying to get out of greylisting because a lot of work has been done, and we’re going to meet that particular standard.

“It’s the action that has been taken after in the value chain,” says Voller.

“The credibility of the enforcement system and the fact that those who are investigated for money laundering are taken to task, and there are prosecutions. We have to demonstrate that as a jurisdiction.”