South Africa has frequent instances of internal fraud and corruption taking place amongst senior management or government officials, being reported daily by the media. Amongst these crimes is that of Money laundering, which poses as one of the major threats to society today. However there are a number of statutory laws in place aimed at combating these criminal acts.
The Financial Intelligence Centre Act (“FICA”) together with the Prevention of Organised Crime Act (“POCA”) seeks to combat all money laundering activities as well as provide the administrative framework for such criminal activities. FICA defines money laundering as any activity which has or is likely to have the effect of concealing or disguising the nature, source, location, disposition or movement of the proceeds of unlawful activities or any interest which anyone has in such proceeds.
To achieve its objectives the centre must process, analyse and interpret information disclosed to it as well as inform and co-operate with investigating authorities and the South African Revenue Service. Other objectives include monitoring and guiding accountable institutions or persons regarding their performance and obligations in terms of FICA. An “accountable institution” is defined as a person or entity that carries out a business as listed in Schedule 1 of FICA.
In terms of section 4, 5 and 6 of Chapter 3 of the POCA, there are three main money laundering offences, namely:
Firstly, The substantive money laundering offence: In terms of this offence, any person who knows or ought reasonably to have known that property is or forms part of the proceeds of unlawful activities and:
- enters into any agreement or engages in any arrangement or transaction with anyone in connection with that property (legally enforceable or not);
- performs any act in connection with such property or in agreement with any other person, concealing or disguising the nature of the property or ownership thereof; or
- assists any person who has commits an offence, whether in South Africa or elsewhere, to avoid prosecution, or to remove/diminish any property acquired directly, or indirectly, as a result of the commission of an offence, will be guilty of an offence.
Secondly, Assisting another to launder the proceeds of unlawful activities: In terms of this offence, a person commits an offence if he knows or ought reasonably to have known that another person has obtained the proceeds of unlawful activities and enters into any agreement with anyone or engages in any agreement/transaction whereby:
- the retention or the control by or on behalf of the other said person of the proceeds of unlawful activity is facilitated; or
- the proceeds of unlawful activities are used to make funds available to the other person, or to acquire property on his or her behalf, or to benefit him in any other way.
Thirdly, Acquisition, use or possession of proceeds of unlawful activities: In terms of this offence, any person who acquires, uses or has possession of property and who knows or ought reasonably to have known that it forms part of the proceeds of unlawful activities of another person, commits an offence.
Protection is afforded by FICA to persons who have reported any money laundering activities. Section 38 states that no action, whether criminal or civil can be instituted against any person who in good faith has made a report. Such a person cannot be made to give evidence in criminal proceedings and will be considered as a competent and not a compellable witness.
FICA contains a number of control measures aimed at identifying or investigating money laundering activities by imposing “Know Your Client” (KYC) requirements on accountable institutions. These requirements include accountable institutions taking the prescribed steps to identify and verify new and existing customers as well as keep records of such clients. Records must also be kept regarding the nature of any transaction, the parties to that transaction and the amounts involved.
Accountable institutions are also obliged to formulate and implement internal rules, to provide training to all employees and to appoint a person to monitor compliance. Cash transactions (above prescribed limit), international electronic transfers, suspicious and unusual transactions must be reported. Failure of such reports constitute an offence.
A case of fraud and money laundering is currently being investigated against former National Youth Development Agency head, Andile Lungisa, and other acts of money laundering activities are continuously being reported to the South African Revenue Service.