Identifying the beneficial owners of an adviser's clients
Who the beneficial owner of a company, partnership or trust client is under South Africa's FIC Act, what an adviser must verify, and how long to keep it.
By Achekam · · 5 min read · For Financial services businesses in South Africa
A family trust wants to invest the proceeds of a property sale. A small company asks for a short-term loan to cover a contract. A partnership of doctors wants advice on its retirement fund. In each case the client is not a person but an entity, and the paperwork arrives with a trust deed, a company registration certificate or a partnership agreement. What it often does not make obvious is the answer to the question South African law cares about most: which human being actually owns or controls this client?
That person is the beneficial owner. For a financial adviser or credit provider in South Africa, identifying them is not optional. This article explains why, what the Financial Intelligence Centre (FIC) says must be done, and how to keep the evidence so you can show it was.
Advisers and lenders are accountable institutions
The FIC lists the sectors whose businesses are accountable institutions subject to obligations under the Financial Intelligence Centre Act (FIC Act). The list includes financial services providers and credit providers, alongside estate agents, legal practitioners, high-value goods dealers, trust and company service providers and crypto asset service providers.
If your practice is an authorised financial services provider, or you lend money as a credit provider, start from the assumption that the FIC Act's client due diligence duties apply to you, and confirm the position with your compliance officer.
Who counts as the beneficial owner
The FIC states that accountable institutions must establish the beneficial owner of a client that is a legal person, partnership or trust, meaning the natural person who owns or exercises effective control over it.
Two words in that definition do a lot of work.
- Natural person. The answer must end with a human being. If a company's shares are held by another company, keep going until you reach a person. A trust whose trustee is a company still has people behind it.
- Owns or exercises effective control. Ownership and control are not always the same. A family trust may have beneficiaries who benefit and trustees who control. A company may be owned by one person on paper and run by another who signs everything. Look for both.
A worked example in words. A private company applies for a loan. Its shares are held equally by two other companies. One of those is owned by a family trust; the other by an individual. Tracing through, the beneficial owners include that individual and the people who control the family trust. The director who signed the loan application may be neither.
Reasonable steps to verify identity
Establishing who the beneficial owner is comes first; the FIC also requires accountable institutions to take reasonable steps to verify that person's identity. That means obtaining evidence, not just a name typed into a form by the client.
"Reasonable" depends on the risk. A small, long-standing family company with a simple shareholding needs less work than a newly formed entity with a layered structure and an urgent transaction. Note what you checked and why you considered it enough.
The nature and purpose of the relationship
Investopedia explains that KYC in banking requires identifying customers, the beneficial owners of businesses and the nature and purpose of customer relationships, and reviewing accounts for suspicious and illegal activity. The same thinking applies to an adviser.
Record why the entity is becoming your client, where the money it will invest or borrow comes from, and what you expect the relationship to look like. When something later departs from that picture, such as a large deposit from an unexpected source or a sudden change of control, it stands out.
Write the method into your RMCP
The FIC states that section 42 of the FIC Act requires every accountable institution to have a risk management and compliance programme (RMCP). The RMCP documents the institution's money laundering, terrorist financing and proliferation financing risks, and the processes, systems and controls it uses for customer due diligence, record keeping and reporting.
Your beneficial ownership method belongs in it: how you trace ownership through companies and trusts, what evidence you accept to verify identity, when a client is treated as higher risk and what extra steps follow. A one-adviser practice needs an RMCP just as much as a large one, though it can be far shorter; the realities of running controls alone are covered in running the books as a one-adviser practice. The FIC's compliance and supervision page lists the accountable institution sectors and summarises the RMCP, client due diligence and record-keeping duties.
Five years of records, kept so they can be shown
The FIC states that accountable institutions must keep records of client information, transactional information and regulatory reports for at least five years from the termination of the business relationship, the conclusion of a once-off transaction, or the submission of a report to the FIC. Five years runs from the end of the relationship, not its start, so a client you have advised for a decade needs its onboarding records kept until five years after you part ways.
Achekam's Document Centre is a folder-based store where a practice can keep one folder per entity client, holding the trust deed or company documents, the ownership chart you drew, the identity evidence for each beneficial owner and your note of the relationship's purpose. A few features fit this use:
- Versions. When a client sends an updated shareholder register or a new trustee's details, upload it as a new version; the earlier ones are kept, so you can show what you held at any date.
- Fingerprints. Every stored file gets a SHA-256 fingerprint, and every upload passes a malware check. If a document's integrity is ever questioned, the fingerprint shows whether it has changed since it was filed, as explained in showing a filed document has not changed.
- Archiving, not deleting. When the relationship ends, archive the folder and note the date, so the five-year period can be worked out.
One more link in the chain: in Achekam, an e-signature envelope with a signer from outside the business must be linked to a client or a CRM lead before it is sent. Make the beneficial ownership file a condition of creating that client, and no mandate or loan agreement goes out to an entity you have not looked through.
Achekam does not trace ownership, verify identities or screen anyone. Your staff do that work under your RMCP; Achekam keeps the record of it.
A file review to start with
Pick three entity clients: a company, a trust and a partnership if you have one. For each, check that the file names every natural person who owns or controls it, holds evidence of each one's identity, explains the purpose of the relationship and is filed where it can be found in five years' time.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
