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PHILLIP TILLMAN | Controls needed to close gaps on money laundering

File photo.
File photo.
Image: Reuters

The Financial Action Task Force’s greylisting of SA has had a severe knock-on effect on businesses in the country. According to the task force, money laundering is a  significant risk factor in the SA economy, and tighter controls are needed to close any gaps.

In response, the SA Revenue Service (Sars) and Companies and Intellectual Property Commission (CIPC) are establishing a register that holds more detailed information about the control and beneficial properties of organisations.

Sars gathers this data through income tax returns, and the CIPC through the new declarations inherent to annual returns. Companies and trusts can’t maintain their compliance with these institutions without supplying their beneficial information.

The CIPC deadline – which lapsed on October 1 2023 – signals the start of greater corporate transparency in SA .There are several challenges companies should be aware of, however. The first is the enormous administrative burden this task places on businesses, especially those that manage several legal entities. Even if they have the best of intentions, it’s possible that they may struggle to comply, which could result in costly fines.

Another key issue involves understanding who qualifies as a “beneficial owner”. This is an individual or entity that directly or indirectly holds a substantial interest in a company, essentially wielding significant control ori nfluence over its operations. For large corporations with diverse portfolios, identifying these beneficial owners among large numbers of companies can feel like navigating a labyrinth.

This challenge goes beyond th einitial identification. Keeping this information updated is equally critical. The CIPC’s register is not a one-time obligation. It requires continuous monitoring and reporting. This becomes a Hercu-lean task for corporations that own multiple subsidiaries, each of which regularly experiences changes in ownership and control.

But there’s no doubting the value in this journey. Identifying beneficial owners isn’t just acompliance requirement but also an ethical responsibility and a matter of reputational risk. Investors, customers and stakeholders are increasingly concerned about companies’ ownership structures. They want to know who’s calling the shots and who bears ultimate responsibility.

Failing to identify beneficial owners can damage trust, erode corporate reputation and lead to potential legalcons equences. To navigate this, corporations must adopt a proactive approach, starting with a thorough due diligence process to map out their corporate family tree and identify beneficial owners. Next, they mustestablish robust internal processesand systems to ensure ongoingcompliance.

Regular audits and checks are essential to maintainan accurate register. Another way is using software that holds the information and can proactively ensure the check occurs.

Imagine a solution that makes it easier to maintain accurate, beneficial information to ensure 100% compliance. The October deadline presented an opportunity for corporations to take the lead in demonstrating responsible corporate governance.

■ Tillman is the CEO of Konsise, a taxsoftware solution

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