Navigating Ultimate Beneficial Ownership (UBO): Key Takeaways from FIC's PCC59 and the Shift to a 5% Ownership Threshold
The Financial Intelligence Centre (FIC) has released Public Compliance Communication 59 (PCC59), which focuses on Ultimate Beneficial Ownership (UBO). In Section 2.18, the FIC strongly recommends using a 5% or greater ownership threshold to determine controlling ownership. This recommendation is based on:
Alignment with the Companies and Intellectual Property Commission's (CIPC) UBO register.
The high risk in South Africa of legal entities being exploited by criminals as UBOs.
The misuse of public procurement processes by legitimate companies with criminal ownership.
Actions to consider:
Update your Risk Management and Compliance Programme (RMCP) to reflect the change in ownership threshold from 25% to 5%.
Additional Key Points:
Identifying the UBO is still required for legal entities such as companies (e.g., PTY Ltd and CC), partnerships, trusts, and non-profit organizations.
It's important to recognize that there may be more than one UBO, as ownership can be held through individual stakes, coalitions, or family connections, and the legal owner may not necessarily be the beneficial owner.
Shareholding may be spread across a complex network of smaller holdings.
Practical examples of identifying a UBO are provided on pages 7 and 8 of the document.
Accountable institutions have the discretion to set a lower threshold than 5% if deemed necessary.
Section 2.31 offers examples of what constitutes "effective control."
Section 2.33 outlines what is meant by "control over management."
Accountable institutions should be able to demonstrate their efforts in identifying the UBO.
UBO identification should be updated in line with the general Client Due Diligence on a risk-based approach.
If no UBO can be identified, the institution should not proceed with the client.
It is suggested that Accountable Institutions conduct Enhanced Due Diligence on clients involved in public procurement.
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