The Congress of South African Trade Unions (Cosatu) has called for information about the beneficial ownership of companies to be made publicly available.
Cosatu and one of its affiliates, the Southern African Clothing and Textile Workers’ Union (Sactwu), presented their submission on the General Laws (Money Laundering and Combating Terrorism Financing) Amendment Bill to the National Assembly’s Standing Committee on Finance on Tuesday.
Cosatu and Sactwu supported the bill, but said they were concerned that, in some instances, it was not sufficiently clear on the definition and disclosure of beneficial ownership.
Regarding the definition of a beneficial owner, they said that, according to international standards, a beneficial owner should “always refer to a natural person and nothing else”.
The bill should ensure that all layers of ownership are pierced so that the actual person who benefits from owning shares in a company is identified. In this regard, they said clause 52(b) of the bill, which proposes to amend the definition of a beneficial owner in the Companies Act, should be reworded so that a “beneficial owner” is limited to mean a natural person.
In addition, the bill should introduce a single broad definition of a “beneficial owner” in the Financial Intelligence Centre Act. Secondary legislation, such as the Companies Act and the Trust Property Control Act, should not alter or expand this definition, because it introduces regulatory uncertainty and creates loopholes that can be exploited, the unions told the committee.
‘Register must be publicly available’
They said the bill attempts to improve law enforcement agencies’ access to beneficial ownership data by mandating the creation of various registers, including a beneficial ownership register for companies, held by the Companies and Intellectual Property Commission.
But Cosatu and Sactwu said they were disappointed that the bill does not seem to make beneficial ownership registers publicly available. The bill includes a reference to making annual returns available electronically, but it is not clear whether this means these returns will be publicly available.
According to Cosatu, the Financial Action Task Force’s “Guidance on transparency and beneficial ownership” (published in 2014) states that beneficial ownership information should be made publicly available as part of understanding the risks associated with legal persons.
The unions said that making beneficial ownership registers publicly available will assist trade unions, civil society and the media to combat tax evasion and corruption.
Not making beneficial ownership registers publicly available creates the risk that these registers will be stored on servers and hard drives “in some department somewhere” without being open to scrutiny. “This would tick the box of collecting information, but it would not win the fight against tax evaders and the corrupt,” they said.
They also called for information about trusts’ beneficial ownership to be made available publicly. Trusts’ beneficial ownership records at the Master’s offices should mirror how the bill envisages that companies’ records will be published and made available annually or when they are updated.
Data protection concerns
Cosatu and Sactwu recognised that objections may be raised, based on the country’s personal data protection and privacy laws, to making the beneficial ownership register public. They submitted that sections 37 and 38 of the Protection of Personal Information Act list the grounds on which the processing of personal information is not a breach of the processing conditions of the Act. These grounds include:
- Where the public interest outweighs the interference with privacy rights;
- The prevention, detection and prosecution of offences;
- Fostering compliance with legal provisions; and
- To protect the public against financial loss due to dishonesty or malpractice.
They said any one of these grounds could be relied on to justify the publication of beneficial ownership data.
