FIC lays bare money launderers, fraudsters’ flow of cash into SA

From stolen public funds originating from neighbouring countries to laundering money through car dealerships and law firms, South Africa is a playground for the spending and distributing of ill-gotten gains.

In a report covering 2017 to 2022, the Financial Intelligence Centre (FIC) says banks are at the coalface of financial crimes in the country.

Its reports over the past five years are related to fraud, followed by tax-related crime, narcotics, money laundering and corruption.

The report released this week shows trends and new methods used by criminals and terrorist organisations to funnel illicit gains into the country.

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Foreign fraudsters

In one case, a request was sent to FIC by a neighbouring country’s financial intelligence unit for information regarding misappropriated funds from a state-owned entity in that country.

It turned out that the culprits had spent R20 million on properties and moveable assets in South Africa.

“The funds were believed to have been transferred to South Africa and to involve politically exposed or prominent influential individuals.   

“The AFU asked the FIC to support a mutual legal assistance process between South Africa and that country to recover the proceeds.”

Another foreign case involved a former cabinet minister and his accomplice, a former head of an asset management company.

The duo were accused of corruption for allegedly receiving kickbacks in the awarding of fishing rights in their country. 

Upon scrutinising transactions, FIC identified two properties in Cape Town and three bank accounts with funds linked to the two.

The assets and cash were subsequently frozen.

Danish suspect

Through FIC, the Danish government was also able to trace its four nationals – a mother and her three adult children.

She was suspected of defrauding her former employer, the Danish National Board of Social Services.

The mother fled to South Africa following her dismissal.

Through its analysis, FIC identified R6.7 million in cash and assets linked to her.

All were returned to the Danish government.

Red-flagged industries

Estate agencies, gambling, car dealerships, dealing in Krugerrands, law firms and trusts are identified in the report as increasingly attracting money launderers.

The use of cash is widespread in transactions.

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In law firms, the anonymity of clients and transactions that are complex in nature is typical, read the report.

Organised crime can use lawyers to conceal the proceeds of crime, obscure ownership through complex layers and legal entity structures and avoid paying tax.

In order to launder money, criminals integrate it into the financial system through, among other methods:

• The purchasing of high-end goods, such as property or motor vehicles;
• Establishing shell companies;
• Moving the money transnationally.

Gathering data from banks

The FIC does not conduct investigations or prosecutions.

As South Africa’s financial intelligence unit, the unit is the only government entity authorised to receive transaction and related data from financial institutions and other organisations.

It then applies the “follow the money” principle to trace possible proceeds of crime and develop financial intelligence reports.

Authorities are able to use FIC data for their investigations in combating financial crime.

Locally, financial intelligence is also shared with the Asset Forfeiture Unit (AFU), which can seize funds if necessary.

Additionally, FIC has the power to block or freeze funds suspected to be proceeds of crime.

The sometimes complex financial crimes happening in the country have since led to grey-listing by the Financial Action Task Force (FATF) three months ago.

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