Enhancing transparency in the beneficial ownership of legal entities and structures in Southern Africa: Challenges and suggested solutions

Charles Goredema
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Charles Goredema: Consultant, South Africa

Journal of Financial Compliance, 2024, vol. 7, issue 4, 368-385

Abstract: It has always been important to know the identity of the beneficial owner of any legal entity. Publicly available knowledge of the identity of an entity's legal owner and beneficial owner, the source of its assets and the activities it undertakes reduces the risk of the entity being misused for criminality. Globally, minimising enclaves of secrecy for dishonest business is likely to deter and disrupt cross-border transfers of the proceeds of tax evasion, organised crime and corruption. Regionally, a strong, stable legal environment for business, underpinned by rules that yield predictable outcomes is conducive to more investment in Southern Africa. There is consensus that information on who owns what needs to be readily available, but progress developing legal and practical frameworks has been slow. Except in the few jurisdictions where legislation has begun to take shape since 2021, there is generally no access to data on beneficial ownership. Often, records on legal entities' ownership and management structures are prepared and maintained manually, impeding access and raising the possibility of fraudulent manipulation. Furthermore, legislation in four countries does not envisage the creation of legal structures such as trusts but does not prohibit them either. Trusts created abroad can operate and be abused in the same manner as corporate entities. On the basis that the current state of regulation is inimical to the business environment, this paper examines challenges to improved regulation and suggests how they can be overcome.

Keywords: beneficial ownership; transparency; trusts; politically exposed persons; customer due diligence; mutual evaluation (search for similar items in EconPapers)
JEL-codes: E5 G2 K2 (search for similar items in EconPapers)
Date: 2024
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