The coming debate on confidentiality and beneficial ownership

Walter Bhengu, project director for legislation and governance at SAICA

Walter Bhengu, Project Director for Legislation and Governance at the South African Institute of Chartered Accountants, sheds light on the balancing act between the protection of personal information, transparency over beneficial ownership disclosure and overall confidentiality.

The Data Protection Act introduced the concept of data subjects and unlike in the European Union, data subjects can be either natural or legal persons and their information is protected by law. This comprehensive coverage has helped companies seek legal assistance whenever they experience a data breach. Commercial information, for example, has always been a fiercely protected area alongside other forms of business information.

The debate over confidentiality is starting to resurface among the business community, amid efforts by the Companies and Intellectual Property Commission (CIPC) to get companies to file their beneficial ownership registers. Registers of beneficial ownership are a register of natural persons who own or control legal entities. They typically include full name, date of birth, identification numbers, residential and postal addresses, email addresses and the degree of ownership/effective control of any natural person associated with the company.

Currently, beneficial ownership information can only be shared with law enforcement agencies or relevant competent authorities, and not with the general public. However, due to a new change in the law coming into effect soon, such registries will be available to the general public for a fee.

Only a small portion of small businesses will be safe from this amendment based on their public interest score. It is important to note that if the public interest score were adjusted upward in line with inflation trends, more small businesses would still enjoy the legal protections of privacy.

In a country plagued by cases of tax profile hijacking and misuse of personal information, this amendment has caused some concern among business leaders. The balance between transparency and protection of personal information is a delicate balancing act. The European Union, for example, faced this dilemma in 2022. That matter had to be litigated to find some form of resolution.

The European Court of Justice ruled that although this balancing act involved anti-money laundering measures, it was still a bit extreme in the sense that such registers of economic interests were open to the general public, as opposed to individuals with a legitimate interest , as the law had previously done. declared. This is a sensible approach that resonates with the general South African legal framework under access to information laws, in which you access information to protect an interest or if it is in the public interest. Wholesale access to information has never been something that companies have had to deal with.

It is recognized that South Africa’s arrival on the gray list in February 2023 has created a need for stricter anti-money laundering measures. The focus has been on building a credible centralized beneficial ownership register so that regulators and law enforcement authorities can detect cases of money laundering, which typically occur through complex commercial structures.

It is also recognized that institutions such as media houses and non-governmental organizations play a role in exposing and combating money laundering. On that basis, these two categories have legal and legitimate interests in accessing beneficial ownership registers. However, it is difficult to understand how an uninterested member of the public should have access to information that would normally be protected under privacy legislation.

The Ministry of Trade and Industry may need to reconsider the practical implications of this amendment. So more conversations with the business community are needed before the Companies Amendment Act comes into full force.