In a significant step toward strengthening financial transparency and compliance with international anti-money laundering (AML) standards, Lesotho has introduced new regulations requiring the disclosure of beneficial ownership in companies and legal arrangements. The regulatory shift brings Lesotho into closer alignment with the Financial Action Task Force (FATF) recommendations and positions the country to better combat illicit financial flows, corruption, and the misuse of corporate vehicles for criminal activity.
For years, the opacity of company ownership structures in Lesotho has posed challenges for regulators, tax authorities, law enforcement, and financial institutions alike. Under previous frameworks, companies were only required to disclose legal owners, often nominees or front entities, without any legal duty to identify the natural persons who ultimately own or control the entity. This loophole made it difficult to trace criminal proceeds, enforce sanctions, or prevent politically exposed persons (PEPs) from hiding assets behind complex structures.
The new beneficial ownership regulations, which took effect in 2024 under amendments to the Companies Act and Financial Institutions (Anti-Money Laundering and Countering the Financing of Terrorism) Regulations, require all companies, partnerships, trusts, and similar legal entities registered in Lesotho to identify, verify, and disclose their beneficial owners to the Registrar of Companies and, where applicable, the Financial Intelligence Unit (FIU).
Key Provisions of the New Framework
- Definition of Beneficial Ownership
A “beneficial owner” is defined as a natural person who ultimately owns or controls a legal entity through direct or indirect ownership of 25% or more of shares or voting rights, or through other means such as significant influence or control over management decisions. - Mandatory Reporting and Central Register
All entities must submit beneficial ownership information at the time of incorporation and update it within a prescribed period (often 14–30 days) following any change. This information will be stored in a central electronic register maintained by the Registrar of Companies, with access rights granted to law enforcement, tax authorities, and financial sector regulators. - Due Diligence by Accountable Institutions
Financial institutions, legal professionals, and corporate service providers (collectively termed “accountable institutions”) must conduct enhanced customer due diligence (CDD) to verify the beneficial ownership of clients before onboarding or engaging in significant transactions. Failing to identify the beneficial owner can result in reporting obligations or the denial of service. - Sanctions and Penalties
Companies that fail to comply with the beneficial ownership disclosure obligations may face administrative sanctions, including monetary fines, deregistration, or disqualification of directors. Criminal liability may also arise in cases of willful concealment or provision of false information.
Implications for Businesses and Investors
The introduction of these rules signals a paradigm shift in Lesotho’s corporate regulatory landscape. Companies can no longer rely on nominee arrangements or opaque structures to shield ownership and must now ensure that governance records reflect actual control. For foreign investors, the new framework brings both obligations and reassurance; while requiring increased transparency, it enhances trust in the business environment and protects against reputational risk.
Additionally, multinational corporations operating in Lesotho must ensure that local subsidiaries and joint ventures are fully compliant, as failure to do so may trigger group-level regulatory exposure in jurisdictions with extraterritorial AML laws.
From a practical standpoint, legal and compliance teams should:
- Review internal shareholding structures and ensure they reflect actual control.
- Update company secretarial records and submit beneficial ownership forms to the Registrar.
- Implement internal policies to monitor changes in control and report updates timeously.
- Train staff on CDD and verification obligations under the Financial Institutions Act.
A Step Toward International Cooperation
Lesotho’s reform comes amid increasing pressure from global bodies such as the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) and the FATF to improve the transparency of legal entities. By adopting beneficial ownership regulations, Lesotho aims to not only reduce financial crime but also strengthen its attractiveness to responsible investment and regional integration initiatives.
The move may also help the country avoid future FATF grey-listing and foster greater cooperation with international tax and financial intelligence partners through initiatives such as the OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes.
Conclusion
The new beneficial ownership regime marks a critical milestone in Lesotho’s journey toward greater financial integrity and governance reform. While compliance may present short-term administrative burdens for businesses, the long-term benefits, in terms of legal certainty, investor confidence, and the rule of law, are undeniable. Going forward, the success of these regulations will hinge on enforcement, public awareness, and ongoing regulatory capacity-building.