Corporate Malaysia has an assignment that must be completed by the end of this month. It's about improving transparency regarding those who control companies in the country, and it's linked to a major assessment of financial integrity.
Through the Companies Act 2016, Malaysia introduced rules on the reporting of beneficial ownership information. Since then, the provisions and guidelines relating to the reporting framework have evolved, so as to keep up with international standards and best practices.
Beneficial ownership
For example, the act defines a beneficial owner as 'the ultimate owner of the shares and does not include a nominee of any description'. This was augmented earlier this year by an inserted section that specifies a company's beneficial owner as 'a natural person who ultimately owns or controls over a company and includes a person who exercises ultimate effective control over a company.'
A company is responsible for maintaining a register of beneficial owners
The expanded definition was part of the latest amendments to the act to strengthen the beneficial ownership reporting framework.
According to the new provisions, a company is responsible for maintaining a register of beneficial owners, while beneficial owners are obliged to notify companies of their status, including any changes to the information recorded in the registers.
Reporting is key
Enhancing the transparency of beneficial ownership information is important because corporate vehicles are sometimes instrumental in the commission of crimes such as money laundering, corruption, fraud, tax evasion, insider dealings and terrorist financing. In such cases, companies are used to conceal the involvement of the wrongdoers and to make others believe that the dirty money is from legitimate business transactions.
As of July, about 55% of active registered companies had complied with requirements
Measures for anti-money laundering and countering the financing of terrorism (AML/CFT) should include a robust beneficial ownership reporting framework.
The relevant amendments to the act came into force in April, with companies originally given until 30 June to lodge beneficial ownership information with the Companies Commission of Malaysia (CCM).
Final extension
The deadline was pushed to 30 September to allow companies more time to obtain and submit the necessary information. The CCM says there will be no further extension and that after 30 September, the commission will impose late lodgement fees. Furthermore, it is an offence under the act for companies and individuals to fail to ensure that the registers of beneficial owners are up to date.
Last month, Domestic Trade and Cost of Living Minister Datuk Armizan Mohd Ali, whose portfolio includes the CCM, said that as of July, about 55% of the active registered companies in Malaysia had complied with beneficial ownership reporting requirements. This compliance rate didn't quite reflect the urgency of meeting the September deadline.
The CCM says the latest amendments in respect of beneficial ownership are critical to Malaysia's preparation for a mutual evaluation exercise by the Financial Action Task Force (FATF), which I wrote about in January.
Mutual evaluation
In a mutual evaluation, FATF members from different countries assess another country to provide an in-depth description and analysis of the latter's AML/CFT system.
Malaysia's mutual evaluation began in June this year and the report is scheduled to be tabled in October next year.
In view of the mutual evaluation, adds the CCM, the supply of beneficial ownership information to competent authorities, law enforcement agencies and reporting institutions in exercising their roles and responsibilities under the respective laws is crucial.
Accountants are duty-bound to have measures in place
Under anti-money laundering laws, accountants are among these reporting institutions that are duty-bound to have measures in place to prevent their organisations from being used as conduits for money laundering or terrorism financing activities.
In the same speech last month, Armizan said that the FATF mutual evaluation was an opportunity for Malaysia to demonstrate to the world that it is 'a jurisdiction of substance, where laws are enforced, and transparency prevails'.
He added, 'To achieve this, we need the unwavering support of the corporate sector. Compliance with beneficial ownership regulations is not merely a box to tick; it is a fundamental responsibility. I urge all companies to embrace transparency as a core value.'
The minister might not have had accountants in mind at the time, but the message definitely applies to them, whether as business owners, corporate officers or providers of professional services.
