1. Illicit Financial Flows

2. 1. Purpose of this presentation
The purpose of this presentation is to discuss efforts by the NPA and other law enforcement agencies to:
Identify and investigate illicit financial flows related to crime
Prosecute matters where there is evidence of a crime
Forfeit assets where there is asset forfeiture potential
Improve controls by identifying systemic weaknesses and legislative gaps
Recommend a way forward

3. 2. Illicit money flows
Law enforcement can only deal with illicit money that is derived from criminal activity
Thus it cannot deal with money derived from unlawful activity that is not a criminal offence
Asset forfeiture provides a possible exception as it can deal with unlawful activities that have not been criminalised

4. 3. NPA and BEPS
Thus the presentation will not deal much with Base Erosion and Profit Shifting (BEPS) to the extent that is not criminal
In addition, to investigate the complex mechanisms utilised in BEPS effectively requires very high level specialist capacity of accountants, business process specialists and others
It is not aware of any criminal cases involving BEPS at the moment
However, any BEPS related cases where there is a suspicion of criminal activity should be reported to the DPCI and NPA as soon as possible for assessment

5. 4 .Focus on suspected proceeds
The NPA has largely focussed its efforts on
identifying, freezing and forfeiting proceeds of crime and
prosecuting those who facilitate the flow of proceeds internally and across international borders
This presentation focusses on the lessons learn from
cases done by the NPA and
working with different partners such as SARB, FIC and DPCI

6. 5. Lessons learnt from cases
In 2016 investigators identified new patterns of illicit money flows across different crime types involving unrelated suspects
In August 2016 a working group was set up by various law enforcement agencies to verify the extent and veracity of the observations
The group analysed and further investigated several cases
and engaged with domestic and foreign law enforcement agencies and the private sector

7. 6. Background (cont)
The group identified a new modus operandi used by these syndicates to circumvent controls and avoid detection , for example:
Controls: Exchange controls regulations in relation to allowances and pre-payments of goods
Avoiding detection: Exploiting gaps in customer verification processes, eg that no customer verification is required for (very large) cash deposits in banks
Using these methods, 1 syndicate was able to smuggle currency or value of R2.1bn from the RSA in a short period

8. 7. Observations on crime operations
A significant increase in cash seizures at ports of entry
Aug 15 – ORTIA R23m and US$3.8m
Oct 15 – ORTIA R 1.5m and US$15 000
Dec 15 – Lebombo R76m (US$5m, Euro22k)
Feb 16 – ORTIA R15m (37kg unwrought gold)
Apr 16 – King Shaka R 7m
Oct 16 – ORTIA R14.9m
Dec 16 – ORTIA R 4.2m in 4 incidents in 1 weekend.
Dec 16 – King Shaka R12m
Feb 17 – Bfn R21m
Mar 17 – Beitbridge R from a pedestrian

9. 8. Observations on systemic weakness
Cash declaration reports not implemented due to admin burden
The current Exchange Control regime is too narrow
Cash seizure process is not based on international best practice
Better training for law enforcement: eg some believe the area between the aircraft and customs/immigration is “no man’s land” where law enforcement may not operate
There is no KYC requirement for persons making cash deposits – even very large deposits can remain anonymous

10. 9. Observations in Systemic Weakness
There is no electronic, searchable, centralised system to identify and individual interests in family trusts
High value negotiable instruments/commodities are not included for customer identification requirements, and purchasers remain anonymous
No requirement to report suspicions purchases at retailers
Informal money remitters – Hawala banking
Lack of coordination in the illicit money flow environment between law enforcement and private sector

11. 10. Steps Forward
To work with the DOJ&CD to evaluate and improve existing legislation relating to
the detection and tracing of family trusts
the detection, seizure and forfeiture of cash
Create a joint JCPS/Finance capacity to deal with illicit money flows funded by the Criminal Assets Recovery Account
To retain the Counter Money Laundering Advisory Council envisaged in FICA to coordinate and facilitate illicit money flow and anti-money laundering initiatives within government and the private sector

12. 11. Steps Forward
To work with the FIC and border management agency to implement cash declaration reporting
Engage with the private sector to improve systems, controls, detection and reporting of illicit money flows
To work with the SARB to better enforce exchange control regulations
Revise and improve training of law enforcement regarding cash seizures and financial investigations
To make cash seizures, money laundering and illicit money flows a strategic objective for the JCPS, SARB and the FIC – “all of Government approach”
Building sound relationships with our neighbouring countries and offshore jurisdictions to detect, trace and seize illicit money flows