New law to publicly expose ‘hidden investors’
Mbongeni Mguni - Tsaone Basimanebotlhe | Monday January 17, 2022 06:00
The bills were all published on December 23 and several have to do with tightening the country’s money laundering protocols. By law, a ‘beneficial owner’ is defined as a person who directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise is the ultimate beneficiary of a share or other securities in a company.
A beneficial owner of a company enjoys the benefits or proceeds of a company or controls a company without being on record as the official owner. Global research has shown that anonymous or hidden investors or owners of companies foster illicit practices such as tax evasion, criminality, fronting, anti-competitive behaviour by concealing themselves behind legitimate boards, directors and share registries.
While the existing Companies Act requires that beneficial owners be declared to the Companies and Intellectual Property Authority (CIPA), their names are not publicly available and are only accessible to investigating authorities such as the BURS and Financial Intelligence Authority. According to gazetted amendments, the Ministry of Investment, Trade and Industry is proposing that Section 218 of the current Companies Act be amended so that beneficial owners and their residential addresses are made available for public inspection. The Financial Action Task Force (FATF), the world’s leading multinational anti-money laundering agency, recently lifted its three year greylisting of Botswana after noting improvements in the country’s adherence to global anti-money laundering and combating of terrorism financing standards.
However, Investment, Trade and Industry minister, Mmusi Kgafela said more needed to be done to tighten the gaps. “As respects the FATF recommendations, an assessment of the Act reflects that the Companies Act is not compliant with FATF standards,” he wrote in a preamble to the new amendments. “There are no specific provisions facilitating access to beneficial owner information and the information is not publicly available. In the absence of legal obligations, companies do not cooperate to the fullest extent possible with competent authorities in determining the beneficial owner. Foreign competent authorities are also unable to access or obtain beneficial owner information,” he further wrote.
The new changes come as the FATF is shifting its international focus to ensuring that all countries develop registers of beneficial owners. FATF president, Marcus Pleyer previously told Mmegi that the organisation expected to have standards on beneficial ownership developed and compulsory for all members within the next two years. Botswana has, however, gone further than FATF anticipates as it not only already has beneficial ownership legislation, but with the latest amendments, will also require this data to be made public.
Pleyer previously told Mmegi that the FATF would not require its members to make the beneficial ownership data public. “We encourage countries to implement public registries, but bear in mind that we set standards for more than 200 countries with different legal systems and public registers may not be compatible for all countries,” he said. “We would rather say there must be a beneficial ownership system and competent authorities must have access to updated information. We encourage, but we don’t require public registers,”he said once more.
The latest proposed amendments will be welcome by lobby groups such as the Botswana Centre for Public Integrity which has been calling for beneficial ownership records to be made public.
Lobby groups have said making these records public would enable ordinary Batswana to be watchdogs against money laundering and other corrupt practices. Previously, CIPA said it was committed to enhancing the collection of beneficial ownership information. “Beneficial ownership registry is a key tool for increasing transparency of the companies register, curbing corruption and reducing instances of money laundering and terrorism financing through identifying the real owners of registered companies,” CIPA spokesperson, Marietta Magashula told Mmegi. Meanwhile, Members of Parliament have their work cut out for them as they will have to go through the 16 bills coming up in the emergency sitting starting on January 24.
The emergency sitting will be followed by the Budget Speech on February 1, which traditionally marks the opening session of Parliament for any year. The bills were unable to find time in the last sitting of Parliament but are urgent as the country seeks to avoid adverse listings by bodies such as the FATF for its anti-money laundering compliance. Other bills due on January 24 include the Virtual Assets Bill regulating cryptocurrency trades, Trust Property Control Bill and several amendments to existing bills.