Chapter 6

Evaluation and Conclusion

Overview

This chapter presents an evaluation of the legal position with regard to money-laundering in South Africa, as well as the implementation of current legislation. Conclusions are drawn regarding the elements in South Africa’s response to money-laundering linked to organised crime that will have to be addressed in future, and where problems may be expected.

Legislation on money-laundering, organised crime, and the confiscating or forfeiting of the proceeds of criminal activity contains a wide variety of instruments with which to address these phenomena. These measures compare very favourably with international standards.

The law is still lacking in terms of administrative money-laundering control measures. South Africa’s current provisions fall short of the international standard contained, for example, in the 40 recommendations of the Financial Action Task Force. It is hoped that the enactment of the Financial Intelligence Centre Bill will go some way in addressing this shortcoming.

Since the mid-1990s, the introduction of statutory provisions against money-laundering and organised crime has gone hand-in-hand with the restructuring of the authorities concerned with their implementation. This restructuring has included the creation of new roleplayers such as the Asset Forfeiture Unit and the Directorate of Special Operations in the office of the National Director of Public Prosecutions, and the Component: Organised Crime in the SAPS’s detective service.

The fact that a variety of institutions will have overlapping responsibility for the same type of investigations inherently holds the danger of conflicts arising between them. This may lead to a duplication of efforts and spending of resources while reducing positive results. Careful co-ordination of activities and continuous communication between roleplayers will be essential to avoid such conflicts.

Evaluating South Africa’s ability to combat organised crime

When evaluating South Africa’s ability to combat organised crime and particularly to use efforts to curb money-laundering as a weapon against organised crime, both the content of the law and its implementation have to be considered. Only then will it be possible to conclude where future action should be directed in order to bolster the country’s ability to curtail organised criminal activity through the use of measures that focus on the illegitimate profits generated by this activity.

The legal position

Systems for the confiscation of the proceeds of criminal activities have come into being throughout the world over the past two decades. These developments can be viewed as a process evolving through a series of at least three models at different levels.

An elementary model comprises the following elements:

The model at the next stage of the evolutionary scale comprises the following elements:

money-laundering offences that may be committed in relation to a wide range of offences;



the guilt element of money-laundering offences that may be inferred from an objective indication that the property is the proceeds of criminal activity;



confiscation of the proceeds of criminal activities still only after conviction;



confiscation of the proceeds of criminal activities possible in connection with the proceeds of a wide range of offences;



statutory presumptions that property in the possession of the defendant is the proceeds of criminal activity; and



specialist units within investigating and prosecuting authorities to conduct investigations and confiscation proceedings.

An advanced model to address money-laundering and the proceeds of criminal activity comprises the following elements:

a conviction-based confiscation procedure and a civil forfeiture procedure;



taxation of criminal proceeds;



sharing of information among state agencies; and



a multidisciplinary agency with centralised responsibility for proceedings to address money-laundering.

Measured against these criteria, it can be said that South Africa has a well-developed model to address the issue of the proceeds of criminal activities. In fact, South Africa’s model resembles some of the most advanced models currently available worldwide.

South Africa’s offences with regard to money-laundering and racketeering are equally well-defined by international standards.

The question may be raised which improvements are still required to complete the state’s legislative arsenal to respond to money-laundering, especially when linked to organised crime.

On the level of the legislative response, the one major shortcoming is the lack of money-laundering control measures, such as those required by the 40 recommendations of the Financial Action Task Force. It is hoped that this will be addressed, as a matter of urgency, by the promulgation and enactment of the Financial Intelligence Centre Bill.

Implementation of the law

Once the legislation establishing the Financial Intelligence Centre is in place, the success of its implementation will be largely determined by the functioning of the centre. It is therefore of crucial importance that the Financial Intelligence Centre will be equipped with the best possible resources to perform the tasks expected of it including analysing information and communicating with roleplayers. Underlying the issue of resources, of course, is the issue of budget allocation. It is in this regard that the state’s sincerity to combat money-laundering will be judged by its private sector partners whose co-operation is vital to the success of this initiative.

Apart from the issue of resources, the structure and placement of the Financial Intelligence Centre are also important. Statutorily, the centre will be an independent body. This notwithstanding, the Financial Intelligence Centre will have to resort administratively under one of the government departments. This will probably be the Department of Finance. The level of identification with the relevant department will have a bearing on the ability of the centre to perform its functions effectively.

The department that will have the administrative responsibility for the Financial Intelligence Centre will have to ensure that its own priorities for the centre are in line with the expectations of the centre’s ‘clients’ in the law enforcement community. Furthermore, the correct balance will have to be found with the placement of the Financial Intelligence Centre within the state’s structure in order to promote co-ownership of its functioning by both institutions in the private sector and law enforcement agencies alike.

On the level of the implementation of the current law, there are a number of issues that must be considered. Almost all of these revolve around effective communication between different organs of government during the course of money-laundering investigations.

The first issue is that of the ability to conduct multidisciplinary investigations. This implies the sharing of information and pooling of resources in the interest of the successful investigation of a money-laundering scheme.

As pointed out above, a money-laundering investigation entails both criminal and financial investigations. In this regard, the South African Revenue Service can be an invaluable partner in the majority of investigations. The Income Tax Act of 1962 protects the information obtained by the South African Revenue Service. The following is an abbreviated extract from the Act:

Preservation of secrecy

4(1) Every person employed in carrying out the provisions of this Act shall preserve ... secrecy with regard to all matters that may come to his knowledge in the performance of his duties ... and shall not communicate any such matter to any person whatsoever other than the taxpayer concerned or his lawful representative nor suffer or permit any such person to have access to any records in the possession or custody of the Commissioner except in the performance of his duties under this Act or by order of a competent court ...

(1A) ...

(1B) ...

(a) Every person so employed shall, before acting under this Act, take and subscribe before a magistrate or justice of the peace or a commissioner of oaths, such oath or solemn declaration, as the case may be, of fidelity or secrecy as may be prescribed.

A recent trend showed a legal relaxation of the strict adherence of the past to the duty of secrecy entrenched in the Income Tax Act. This is evident from the Prevention of Organised Crime Act that allows the National Director of Public Prosecutions access to certain information, including information under the control of the South African Revenue Service:

Access to information

71(1) The National Director may request any person employed in or associated with a Government Department or statutory body to furnish him or her with all information that may reasonably be required for any investigation in terms of this Act and such person shall notwithstanding anything to the contrary contained in any law which prohibits or precludes him or her -

(a) from disclosing any information relating to the activities, affairs or business of any other person; or

(b) from permitting any person to have access to any registers, records or other documents, or electronic data which have a bearing on the said activities, affairs or business,

furnish the National Director with such information and permit the National Director to have access to any registers, records, documents, and electronic data, which may contain such information.

This provision has allowed the South African Revenue Service to share information under its control, especially in investigations concerning commercial crime and the proceeds of criminal activity. This trend needs to be enhanced to the point where the South African Revenue Service can become a fully-fledged partner participating in almost every investigation of money-laundering or the proceeds of criminal activity.

Another important aspect of the ability to conduct multidisciplinary money-laundering investigations is the co-ordination of the actions of different investigating authorities. The possible fragmentation of the responsibility to investigate money-laundering linked with high-level organised crime, is an issue of concern.

From the discussion in the previous chapter, it is clear that a number of bodies in the SAPS and the prosecuting authorities will be tasked with the investigation of organised crime, including money-laundering, as part of their duties. This overlap in responsibilities holds great potential for conflict between these bodies that can be to the detriment of the successful combating of money-laundering.

A number of institutions in the office of the National Director of Public Prosecutions that will participate in investigations of organised criminal groups and their activities are new structures. This means that their functioning and co-operation with other newly established, as well as with existing structures are still uncertain. It is hoped that sound law enforcement practice will dictate the manner in which this co-operation will evolve. Effective communication at all levels will be of crucial importance to avoid situations where two or more bodies are inadvertently investigating the same organised criminal group or criminal activity without being aware of each other. Such a duplication of efforts and application of resources with the risk of reducing positive results should be avoided at all cost.

Depending on the direction this evolution will take, it may be that a greater need for centralising the investigations of money-laundering involving high-level organised criminal groups is appropriate. If this is the case, it may be worthwhile to consider the possibility of extending the operation of institutions such as the national and provincial Organised Crime Secretariats of the SAPS to co-ordinate investigations with bodies outside the SAPS. In the meantime, it may be possible to avoid the conflicts referred to above by allowing a body such as the Asset Forfeiture Unit to serve in a facilitating capacity that will combine the different areas of expertise of the relevant investigating bodies.

An area where there is still a great need is training and the enhancement of skills. Since no money-laundering or racketeering prosecutions have been completed, there is still an obvious lack of experience among investigators and prosecutors in this area. Another area where there is an obvious lack of experience in the application of the relevant statutory provisions is with the judiciary. This situation is not unique to South Africa. In fact, similar development problems have been experienced in each jurisdiction where a regime to curb money-laundering coupled with the confiscation of the proceeds of criminal activities has been introduced.

The lack of skills and experience at the investigative level can be addressed by making use of foreign assistance in training programmes. Offences similar to South Africa’s money-laundering and racketeering offences are defined in a number of jurisdictions. The techniques to investigate these offences are more or less similar, irrespective of where the investigation takes place.

Foreign assistance can also be used in the training of prosecutors, albeit to a lesser extent. Although money-laundering and racketeering offences in South Africa appear similar to those of other jurisdictions, they are applied in a different legal environment. The backdrop of the South African criminal law, criminal procedure, law of evidence and constitutional law against which these provisions are to be applied makes in-depth training by foreign practitioners impossible.

In the area of judicial orientation, foreign assistance has a very limited role to play. The judiciary is required to apply the provisions of South African law in the legal environment described above. The only value that foreign experience can have in this regard is to demonstrate the importance of money-laundering and racketeering prosecutions and the significant effect that these can have on organised crime.

Apart from foreign assistance in training programmes, the enhancement of skills and experience among prosecutors and judicial officers alike will be a long process. This process will go hand-in-hand with the establishment of precedents by the courts. Over time, these precedents will become a body of law that may be used as guidelines for prosecutors and judicial officers.

The success of the implementation of the current provisions against money-laundering and organised crime will ultimately depend on the attitude of investigators and prosecutors towards investigations and prosecutions involving the proceeds of criminal activity. As long as these attitudes are primarily focused on the underlying activities that generate illegitimate profits, the money-laundering and racketeering provisions will not be used to their full potential.

It seems that the number of investigations which deal with the proceeds of criminal activities are increasing. This, together with the initiatives within the different components of the law enforcement society to address organised crime and money-laundering, are indicative of a positive change of attitude towards investigations that aim to connect the proceeds of crime to their origin.

If this trend is continued, the full value of current and future measures to combat money-laundering will be attained. This value lies, on the one hand, in using these provisions as alternative investigating routes that may lead to the uncovering of the underlying criminal activity, and on the other, in the ability to disrupt the functioning of organised criminal groups through financial devastation. In this way, these measures will contribute in reducing the threat held by organised criminal groups.