Companies and other legal entities operating in Ethiopia are now required to disclose their ultimate owners or controllers by January, under a sweeping new directive.
Violations of the regulation carry severe penalties, including fines of up to 500,000 birr, business license suspensions, and complete exclusion from public procurement tenders.
Published in the Federal Negarit Gazette on July 3, 2018 EC, the "Transparency of Legal Persons Beneficial Ownership Information Regulation" gives legal entities three months until October 2, 2019 EC to identify and internally record their beneficial owners, and six months until January 2, 2019 EC to submit the information to the Ministry of Trade and Regional Integration.
The regulation permits the ministry to extend this transitional period by up to two months if deemed necessary.
This new framework marks a major milestone in authorities' ongoing efforts to combat money laundering and terrorist financing, and to establish a centralized beneficial-ownership registry.
Under the regulation, natural persons holding a 10 percent or greater direct or indirect share in share companies are classified as beneficial owners. The law is designed to prevent actual ownership from being concealed behind nominee shareholders or complex corporate structures.
However, certain entities are exempt from the regulation, including civil society organizations, fully state-owned federal or regional enterprises, cooperatives, government institutions, religious organizations, and political parties.
Non-compliant entities face steep administrative and financial sanctions. Submitting information past the deadline, providing incomplete or inaccurate data, or failing to update details within 14 days carries fines ranging from 100,000 to 500,000 birr.
Furthermore, failing to conduct routine ownership reviews or to appoint a designated information-registration officer can lead to the suspension or revocation of a business license.The Ministry of Trade and Regional Integration may also publish the names of non-compliant entities on its website.
Additionally, the Federal Public Procurement Service will gain direct access to the registry data, and financial watchdogs like the National Bank of Ethiopia and the Ethiopian Capital Market Authority are empowered to request ownership information from the entities they license and supervise.
While the National Anti-Money Laundering Committee accelerates efforts to roll out the central IT infrastructure by March 2017 EC, thousands of private companies face the immediate statutory obligation to identify, document, and submit their beneficial ownership details before the compliance window closes.
