Anti-Corruption and Money Laundering in South Africa | November 2007
By Johann Scholtz and Dawid de Villiers, Webber Wentzel Bowens, Johannesburg, South Africa

The Financial Intelligence Centre Act, 2001 (FICA) has introduced several mechanisms aimed at combating money laundering activities. FICA has established a regulatory framework designed to identify the source of proceeds which are suspicious and possibly derived from illegal activities.
FICA imposes a reporting obligation on certain individuals to report suspicious transactions to the Financial Intelligence Centre (the Centre). Failure to report a suspicious transaction is an offence and, upon conviction, the person who failed to make the report may be liable for a fine of R 10 million or 15 years imprisonment.

In addition, FICA places onerous identification, record keeping and reporting burdens upon “accountable institutions”. These are institutions that have been determined by legislature as being the most likely to come into contact with money laundering activities. FICA includes banks, authorised users of exchanges, investment managers, attorneys, accountants and estate agents in the definition of accountable institutions.

Accountable institutions are required to formulate and implement internal administrative systems to ensure that they know their customers, keep accurate records of them and report suspicious transactions to the Centre. As a pro-active measure, accountable institutions are also required to train their employees to recognise and deal with suspected money laundering transactions.

Anti-Corruption Legislation
The Prevention and Combating of Corrupt Activities Act, 2004 (the Act) represents a major effort in the South African government’s strategy to combat corruption at all levels of South African society. In commenting on the Act, then Deputy Justice and Constitutional Development Minister Cheryl Gillwald remarked that the Act reflects the political will of the South African government to change its approach to combating corruption.

The Act applies to a wide range of individuals including South African born individuals, companies, public officials, foreign public officials, employers and employees, judicial officers, agents, members of the legislative authority and members of the prosecuting authority.

An interesting feature of the Act is that it criminalises corrupt actions undertaken outside South Africa by any South African citizen, anyone domiciled in South Africa, or any foreigner, if

• the act concerned is an offence under that country’s law, or
• the foreigner concerned is present in the Republic of South Africa or
• the foreigner concerned is not extradited.

A revised definition of corruption contained in the Act follows a modern trend to “unbundle” the offence. Some of the most important offences that are included in the meaning of corruption for the purposes of the Act, are:

• corruptly accepting gratification
• corruptly giving gratification
• fraudulent acquisition of a private interest
• bribery in relation to auctions
• corruption in relation to sporting events
• offences in relation to tenders
• bribery for giving assistance in regard to contracts
• corruption of witnesses
• bribery of public officers
• bribery of foreign public officials
• corruptly using office or position for gratification
• dealing with, using, holding, receiving or concealing gratification in relation to any office.

Another significant feature of the Act is that makes it an offence not to report attempted or actual corrupt transactions. Under section 34 of the Act, a person in a position of authority, who has knowledge or ought to have knowledge that another person has committed an offence under the Act has duty to report this to a police official.

Individuals found to have contravened the provisions of the Act face extremely severe sanctions. The Act authorises a High Court to impose a sentence of life imprisonment for certain offences. Regional courts and magistrates courts are authorised to impose sentences of 18 years and 5 years respectively for other offences.

Comment
For the first time in its history, South Africa has a comprehensive and practical legislative framework aimed at combating and preventing corruption and money laundering.

However, certain shortcomings should also be identified. Many commentators believe that public sector bodies, as a result of capacity constraints and a general lack of political will, are somewhat lax in their application and use of the anti-corruption and money laundering legislation. Concern has also been raised that some of the legislation, particularly FICA, is too demanding on resources. In addition, it has also been argued that the legislation is focused on the public sector and does not deal adequately with corruption in the private sector. In this regard, the fact that legislation on private funding of political parties has, to date, not been enacted, is often highlighted as a significant shortcoming.

Ultimately, while recent, high-profile criminal prosecutions for corruption indicate that the political will to tackle corruption does exist, the implementation of anti-corruption measures will continue to present a major challenge.

Johann Scholtz is a partner in the Johannesburg office of South Africa firm Webber Wentzel Bowens. His areas of expertise include all aspects of financial services law regulation, including stock exchange and securities law insider trading and money laundering. Johann was appointed as a member of the new advisory board of the African Regional Forum of the International Bar Association and is ranked by Chambers Global 2007-2008 as a leader in his field. Contact Details: Tel: + 27 11 530 5214 Email: johanns@wwb.co.za Dawid de Villiers is a candidate attorney in the Johannesburg office of Webber Wentzel Bowens. He graduated from the University of Pretoria in 2007 and is presently a member of Johann Scholtz's team. Contact Details: Tel: + 27 11 530 5803 Email: dawidd@wwb.co.za