OF&A :: Getting Tough On Money Laundering

Getting Tough On Money Laundering

GETTING TOUGH ON MONEY LAUNDERING

Supergangsters seem to have identified South Africa as a fresh and innocent market for money laundering. This is the process by which illegitimate proceeds are made to look legitimate, usually by passing them through a legitimate financial system. Sanctions-busting and related shady dealings during the apartheid era fuelled a culture of illegality in South Africa, but the re-entry of South Africa into the international community has also opened the door to drug syndicates and racketeers. These sophisticated international money launderers are using South African institutions to 'clean' their dirty money.

OF&A can investigate possible money laundering activities by identifying suspicious transactions discreetly and effectively.

South African Market

Experts have estimated that about 500 billion US dollars around the world are laundered each year and, until recently, South African law provided no legal way to track down money launderers, carry out investigations in foreign countries or repatriate the proceeds of any crime or the criminal involved. Ockie Fourie of OF&A comments: "As the rest of the world tightens up on implementing counter money laundering laws, so South Africa will become a more easily targeted market for money launderers, if its law enforcers do not do the same."

Legislation

Fulfilling the desperate need for legislation to curb money laundering, the Proceeds of Crime Act was passed in November 1996. The aim of the Act is to take the profit motive out of crime by making it almost impossible to launder money. Previously, criminals could defraud or steal from a company and use the money to buy houses, cars and jewellery. "Even if they were convicted, they could keep their luxuries and assets," adds Fourie.

The Act now allows the High Court to issue an order freezing any 'proceeds of crime' before a suspect has been arrested. Assets will be placed under curatorship until the end of the trial, when the assets can then be confiscated. The Act makes money laundering an offence, and guilty parties face up to 30 years in prison.

Fourie believes that for this legislation to be effective, the law needs to apprehend and convict all types of money launderers. These include:

People involved in any aspect of 'cleaning' money
People concealing evidence that could reveal laundering activities
People accepting dirty money in exchange for goods or services
People who alert money launderers to police investigations.

For this reason, employees at the most vulnerable of companies for money laundering need to be made aware of suspicious activities and report them. Typically targeted for money laundering are law firms, banks, building societies, retailers and wholesalers, insurance and investment companies, car dealers and even casinos.

Banks' Responsibility

More responsibility has been place on banks to uncover suspicious transaction. This includes the banks' obligation to report suspicious transactions to the proposed financial information unit. These transactions can be ones which appear unnecessarily complex or unusual, or that form part of a 'peculiar pattern', as well as transactions which may have been structured to avoid a future reporting threshold. Fourie suggest: "Banks should ensure that their staff members are observant, and act upon any particular unusual movements within bank accounts by investigating irregularities immediately."

OF&A has the expertise to assist banks, government and other institutions by investigating reported suspects wanting to transact large amounts of cash or cheques. OF&A then keeps records of these types of dealings in order to assist the police when they are investigating fraud allegations. Fourie concludes: Money laundering must be effectively legislated, and the law enforced, in order to prevent South Africa from becoming the money laundering capital of the world."

Case Study

A lawyer was approached by a Zambian in Johannesburg, who said that he was buying precious stones from a dealer and wanted the lawyer to handle the transaction for him. The lawyer drew up a contract between the buyer and seller where, upon receiving the goods, the buyer would give the lawyer written instruction by fax to pay out the money. He asked the lawyer for his bank account details, and within two days a cheque several million rand was deposited into this account. After a few days, the lawyer received a fax from this 'client' authorising him to pay out the full amount per cash cheque to the named seller, who would collect the cheque in two days time from his office. The lawyer immediately made arrangements with his bank to have the cash available, as the seller was in a hurry to get back to his own country. The guaranteed cash cheque was duly collected, and the cash withdrawn within an hour.

However, there were no precious stones involved, only a stolen and forged cheque from a Swaziland organisation. OF&A was called in, and, upon checking the information of the parties involved, the whole procedure was proved fictitious and just a money laundering scam. Although the collaborators were positively identified, they were Nigerians who simply left the country with their freshly laundered money.