Financial institutions could face new compliance requirements under proposed rules requiring them to identify and verify their beneficial owners and regularly assess and confirm whether those owners meet honesty and integrity requirements.
The Financial Sector Conduct Authority and the Prudential Authority published for consultation “Draft Joint Standard 1: Requirements pertaining to beneficial owners” on 14 August 2026.
The draft Joint Standard would require institutions to assess and confirm beneficial owners’ compliance at least every two years, maintain an up-to-date beneficial-owner register, submit it annually to the relevant Authority, and report new, potential, or departing beneficial owners within 30 calendar days.
The FSCA and the PA say the proposed framework is intended to address a gap identified in the Financial Action Task Force’s 2021 Mutual Evaluation Report (MER), which found that fit-and-proper requirements in many sectors did not extend to beneficial owners.
Who is a beneficial owner?
The draft Joint Standard applies to financial institutions, as defined in section 1 of the Financial Sector Regulation Act, and their beneficial owners. However, it excludes financial institutions that are not accountable institutions under the Financial Intelligence Centre Act (FICA), while expressly including co-operative financial institutions.
It also proposes excluding certain natural persons from the definition of beneficial owner. These are people who acquired an ownership interest in a financial institution through listed securities; directly or indirectly as a member of a retirement fund or an investor in a collective investment scheme; or through an employee share scheme.
Ownership and effective control
The draft defines direct ultimate ownership as holding 5% or more ownership in a financial institution.
Direct effective control is defined separately. A natural person exercises direct effective control if they can exercise or control the exercise of 15% of voting rights, or any other material rights, in relation to the institution; appoint or remove 15% of the members of its governing body; or have a material impact on the decision to appoint or remove 15% of those members.
Effective control can also arise through the ability to materially influence the institution’s management or operations, a key person or significant decisions, or otherwise materially influence decisions relating to, or take advantage of, its capital, assets, or debts.
The draft also provides for indirect effective control where a person, alone or together with others, can materially influence another person who has effective control or holds 5% or more ownership in the financial institution.
The Authorities say further regulatory instruments and/or guidance on what constitutes direct and indirect effective control will be provided.
Honesty and integrity
A beneficial owner must be honest and have integrity.
The draft lists circumstances that would constitute prima facie evidence that a natural person may lack honesty and integrity. These include convictions for financial crimes and certain other offences involving dishonesty; civil liability or judgments involving specified forms of dishonesty or financial crime; frequent or severe enforcement action; removal from an office of trust for specified misconduct; a breach of a fiduciary duty; and certain conflicts of interest.
The list also covers being suspended, dismissed, or disqualified from acting as a key person; certain regulatory or professional refusals, withdrawals, suspensions, or terminations; disciplinary action by a professional body or designated authority; knowingly providing false or misleading information to, or obstructing, a designated authority; and previous findings that a person was not fit and proper where the reasons have not been remedied.
Other circumstances that may constitute prima facie evidence are involvement as a director or senior manager in a business that was placed under statutory management or curatorship, resolution, business rescue, or liquidation while the person was connected to it, or within one year of that connection.
A person can make a declaration to the Authorities if one or more of the listed circumstances applies but they wish to assert that they are nevertheless honest, have integrity, and are fit and proper to be a beneficial owner.
The Authorities must consider the listed factors, together with any other reasonable considerations they regard as relevant, when assessing honesty and integrity.
Ongoing identification and verification
Financial institutions would have to establish governance policies, processes, and procedures to ensure compliance with the Joint Standard.
They would also have to take all reasonable steps to identify their beneficial owners, obtain relevant information about them, and verify that information.
An institution would have to assess and confirm that its beneficial owners comply with the honesty and integrity requirements as soon as reasonably possible after they are identified. The assessment would then have to be conducted periodically using a risk-based approach, including rescreening, and at least every two years.
Institutions would have to record appropriate details of their beneficial owners in a repository, ensure that the information remains accurate and up to date, and annually submit the register to the responsible Authority.
They would also have to provide details of all beneficial owners when applying for a licence or authorisation under a financial sector law.
Once licensed, an institution would have to notify the Authorities of a new or potential beneficial owner within 30 calendar days of identifying that person. It would also have to notify them within 30 calendar days if a person ceased to be a beneficial owner.
Governing-body responsibility and supervision
The Statement of Need says the governing body of a financial institution would be responsible for ensuring that the institution meets the requirements of the proposed Joint Standard.
The Authorities intend to review and assess the adequacy of institutions’ policies, processes, and practices relating to beneficial owners as part of their future supervisory programmes.
The Authorities also say they will continually assess the effectiveness of the Joint Standard and consider any unintended consequences for the industry.
Why the Authorities say the rules are needed
The Statement of Need links the proposed framework to deficiencies identified in South Africa’s 2021 FATF MER.
The report found that, although fit-and-proper criteria existed in many sectors, they often did not cover beneficial owners. The deficiency related to FATF Recommendation 26, which calls for measures to prevent criminals or their associates from holding, or being the beneficial owner of, a significant or controlling interest in a financial institution.
The General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act of 2022 subsequently amended the Financial Sector Regulation Act (FSRA) by inserting Chapter 11A, which deals with beneficial owners and empowers the Authorities to make standards covering, among other things, fit-and-proper requirements, identification and verification, and reporting.
The Authorities say a robust beneficial-ownership framework can help to prevent criminals or their associates from owning or controlling financial institutions. They also say screening beneficial owners against sanctions lists, criminal databases, politically exposed persons registers, and adverse media could assist in preventing financial institutions from being controlled by people involved in corruption, terrorism, organised crime, or sanctions evasion.
The Statement notes that the Authorities are also assessing whether amendments to the FSRA are necessary to regulate aspects relating to associates of beneficial owners and have engaged with National Treasury on this issue.
Co-operative financial institutions
The draft specifically includes co-operative financial institutions (CFIs).
The Authorities say CFIs have characteristics similar to banks and are susceptible to money-laundering risks in providing financial services. They note that some CFIs are larger than co-operative banks and pose greater risks.
The Statement also identifies the exclusion of CFIs from the accountable-institution framework under FICA from a deposit-taking perspective as a deficiency identified in the MER.
The Authorities say including CFIs is intended to promote consistent beneficial-ownership and honesty-and-integrity requirements across comparable financial institutions, align with international anti-money laundering and counter-terrorism and proliferation financing standards, and address the deficiency identified in the MER.
Impact on financial institutions
The Authorities expect the proposed Joint Standard to have a significant positive impact and envisage that it would contribute substantially to combating financial crime. They say it has the potential to build trust in the financial system, align South Africa with international standards, and protect consumers from harmful financial crime.
At the same time, they acknowledge that the proposed requirements would likely increase compliance and administrative burdens and result in additional costs, particularly those associated with the continued identification and verification of beneficial owners.
The Authorities say the exact impact is difficult to quantify at this stage and are asking financial institutions to provide qualitative and quantitative information on the expected impact through the consultation process.
They say they will consider those submissions and reassess whether the draft strikes an appropriate balance between costs and benefits.
Comments on the draft Joint Standard must be submitted on the comments template to the FSCA at FSCA.RFDStandards@fsca.co.za and the PA at PAStandards@resbank.co.za by 25 September 2026.
