Big change coming for South African companies

The National Treasury published a new Draft Bill to combat money laundering and terrorism financing that has important implications for South African companies.

These laws will also bring South Africa one step closer to exiting the Financial Action Task Force’s (FATF) greylist.

The FATF is an international body that sets standards for combating money laundering and terrorist financing.

In February 2023, the FATF officially ‘greylisted’ South Africa, meaning the country was identified as a jurisdiction under increased monitoring due to deficiencies in its measures to combat financial crimes.

This came after a 2021 evaluation found significant gaps in South Africa’s ability to investigate and prosecute money laundering, corruption, and terrorism financing cases.

The FATF pointed to weak enforcement of existing laws and limited convictions in high-profile corruption cases, particularly those linked to state capture, as key concerns for South Africa.

In addition, the organisation said shortcomings in regulatory oversight of non-financial businesses, trusts, and beneficial ownership transparency also contributed.

The FATF has a list of 40 recommendations, where members are expected to achieve satisfactory levels of compliance. 

South Africa is nearing the deadline for being removed from the FATF greylist, which could have disastrous consequences for the country.

South Africa has made significant progress toward exiting the greylist, with 16 of 22 action items addressed.

However, Momentum Investments Group chief economist Sanisha Packirisamy said key issues like money laundering investigations remain. 

Finance Minister Enoch Godongwana said in March 2023 that South Africa could be removed from the greylist by the middle of 2024.

That would have made South Africa the second fastest country ever to be removed from the grey list.

However, despite solid progress, the government’s self-imposed deadline of mid-2024 came and went, with South Africa remaining on the greylist.

Last year, Deputy Finance Minister David Masondo said that South Africa will likely not get off the list soon, and October 2025 is the most realistic timeline for achieving this.

“We are just being realistic given what we know and what we still need to do,” Masondo told Business Day.

Staying on the greylist for longer could negatively impact the country and businesses.

Adverse effects could include increased compliance costs, restrictions to the global financial system, higher funding costs, fewer and more expensive hedging opportunities, and the loss of regulatory equivalence status.

However, Godongwana is spearheading efforts to introduce legislative reforms, including amendments to anti-money laundering and anti-terrorist financing laws, and has made significant progress.

The latest move to meet the FATF’s requirements came on 19 December 2024, when the National Treasury published the Draft General Laws Amendment Bill for public comment.

The Treasury explained that this Draft Bill aims to demonstrate South Africa’s commitment to strengthening its anti-money laundering and combating the financing of terrorism system.

The Draft Bill contemplates amendments to the Nonprofit Organisations Act, the Financial Intelligence Centre Act, the Financial Sector Regulation Act, and the Companies Act.

Webber Wentzel’s Madelein van der Walt, Serena Kalbskopf, and Nasrin Kharsany said the proposed amendments aim to address the remaining deficiencies identified by the FATF’s evaluation in 2021. 

“They follow the enactment of the related General Laws Amendment Act, which, among other amendments, introduced increased beneficial ownership and beneficial interest disclosure on companies,” they said.

They explained that the Draft Bill proposes amendments to the Companies Act that:

• Allow the Companies and Intellectual Property Commission (CIPC) to deregister a company for failing to submit the securities register or the register of beneficial interest in the prescribed format for one year or more
• Permit the CIPC to impose an administrative fine for failure to comply with a compliance notice issued for failure to submit the securities register or the register of beneficial interest
• Allow for the review of the aforementioned administrative fine by the Companies Tribunal.

The legal experts said the CIPC previously published reminders regarding beneficial ownership and related filings and has introduced a hard stop restriction on its filing system.

Under this system, annual returns cannot be filed without first submitting or updating required beneficial ownership information. 

If enacted, the proposed amendments would bolster the CIPC’s powers to enforce companies’ obligations to submit required shareholding, beneficial ownership, and beneficial interest information prescribed under the Companies Act.

The deadline for public comment on the Draft Bill is 6 February 2025. 

“Irrespective of the Draft Bill, companies must ensure that their company registers are up to date with beneficial ownership and beneficial interest information – as relevant – and file the required information with the CIPC,” they said.

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