Beneficial ownership transparency and data protection in South Africa

Overview

Beneficial ownership transparency (BOT) is one of the measures used internationally to combat financial crimes and the misuse of corporate entities. Making more beneficial ownership (BO) information available to those who can use it effectively helps solve issues around corporate accountability and illicit financial flows. BOT is gaining momentum globally, with over 120 countries committed to implementing reforms. This also helps countries to meet anti-corruption requirements such as those set by the Financial Action Task Force (FATF), the global standard-setting body on combating money laundering. [1] South Africa is one of these countries working toward meeting the FATF Recommendations. Some of FATF’s key Recommendations [2] require countries to define the term “beneficial owner” and address the misuse of legal persons and legal arrangements. These Recommendations allow for flexibility depending on national legal frameworks.

In an attempt to meet these requirements, South Africa is in the process of policy reform, including the introduction of the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Bill on 29 August 2022, [3] with the hopes of strengthening the fight against money laundering. At the time of writing, the Bill was still being considered by Parliament's Finance Standing Committee. It was signed into law in December 2022. South Africa has also amended some of its laws to ensure financial transparency, including amending the Financial Intelligence Centre Act, 2001 (FICA).

One of the globally used approaches to BOT, which also meets the FATF Recommendations, is to establish a register that lists the beneficial owners of corporate entities as well as allowing interested parties access to BO information. Public access to central BO registers has, however, resulted in concerns being raised as to how these BOT measures interact with the right to privacy internationally, including in South Africa. Whilst the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Bill includes provisions for the creation of a BO register, many of the implementation details will be covered by secondary legislation, including rules governing access to the register.

The right to privacy in the current informational age is one of the cornerstones of a democratic society. It protects values such as autonomy, dignity, and security. In South Africa, the right to privacy is protected under Section 14 of the Constitution. [4] The right to privacy includes the right to “protection against the unlawful collection, retention, dissemination, and use of personal information”, [5] and the Protection of Personal Information Act, 2013 (POPIA) was promulgated to “promote the protection of personal information processed [6] by public and private bodies”. [7] POPIA provides for the conditions of lawful processing of personal information. Concerns have been raised globally about BO information being collected and made public or publicly accessible, and whether that may infringe on the beneficial owner’s right to privacy and be in contravention of privacy regulations like POPIA in South Africa.

This policy briefing interrogates whether BOT accommodates protection of personal information in South Africa. Through desktop research and analysis of existing literature, this paper considers BOT in the South African context and the pertinent issues relevant to South Africa, such as:

• whether BOT is in the public interest and justifies the limitation to the right to privacy;
• application of POPIA provisions to the establishment of BO registers and access to BO data;
• the interaction of BOT practices with applicable legislation in South Africa;
• personal information on minors as part of BO disclosure;
• gender information in BO data.

In conducting desktop research on BOT, particularly in light of data protection considerations, it is evident that BOT is an emerging topic in South Africa; as such, the available literature is limited in scope. This policy briefing considers BO as it relates to companies rather than trusts and other legal arrangements, partnerships, not-for-profit organisations, or similar foundations. The relationship between these and BOT is a very important policy area for further research.

Based on available evidence, this paper offers considerations for emerging policies and their application. These include:

• policies that ensure adherence to the provisions of POPIA, including consideration to further processing that may occur when BO data is accessed by third parties;
• implementation of adequate safeguards in the publication of gender data and data on minors;
• adoption of company internal policies that ensure the protection of data subjects’ personal information.

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