Ultimate beneficial ownership (UBO) registers rest on a simple premise: behind every company sits a real person who can be identified.

According to RelyComply, that premise is starting to crack. Generative AI now allows criminals to fabricate entire identities, complete with faces, documents and corporate paperwork, raising the prospect that the person at the top of an ownership chain may not exist at all.

The shift comes at an awkward moment. Global adoption of centralised UBO frameworks has been slow, and registers already face disputes over data privacy and cross-border information sharing.

While regulators work to close long-standing gaps around shell companies and nominee directors, fraudsters have moved on to synthetic identities that can be reused across institutions and jurisdictions, weakening international anti-money laundering (AML) efforts.

In South Africa, a beneficial owner is defined as a natural person who ultimately owns or exercises effective control over a company. The Companies and Intellectual Property Commission (CIPC) applies a disclosure threshold of 5% or more of shareholding or voting rights, and has operated a national register since 2023.

Under the Financial Intelligence Centre Act (FICA), accountable institutions must identify and verify the beneficial owners of their clients. Yet distinguishing a genuine owner from a convenient stand-in is frequently left to each institution’s judgement.

The scale of the threat is growing quickly. Thomson Reuters reported in 2023 that synthetic identity fraud accounts for more than 80% of new account fraud. In South Africa, traditional document fraud fell by 73% in the first quarter of 2025, while synthetic identity fraud jumped 153% year on year.

Source link