South Africa faces ‘perfect storm’ of financial crime, ready to ‘fight back’

financial crime
10 Jul 2024

Only by prioritising a concerted crackdown that brings all stakeholders together can the country arrest the spread of financial criminality.

South Africa is grappling with a “perfect storm” for rampant financial crimes like money laundering and fraud that are going widely under-reported and under-prosecuted, said Chad Thomas, CEO of IRS Forensic Investigations, at a Fighting Financial Crime conference hosted by compliance solutions leader DocFox.

The cost of financial crime is staggering, with estimates that money laundered globally each year amounts to 2-5% of world GDP—$800 billion to $2 trillion. Yet in South Africa, much white-collar crime goes undetected or unaddressed because of limited resources for investigation and enforcement.

“We know people lost their life savings or were driven to suicide by fraud, but many cases simply go unreported out of embarrassment,” Thomas said. “Other countries increasingly treat financial crime as the national security threat it is, but South Africa hasn’t prioritised it adequately amid the burden of violent crime.”

He highlighted key agencies like the Hawks are operating at half their required capacity, with financial crime case backlogs stretching over five years due to budget and staffing constraints. Greater political will and collaboration across public and private sectors are needed to finally get ahead of these crimes.

Alarming statistics like these underscore the urgency for organisations and individuals, such as the  Financial Intelligence Centre (FIC) and other industry leaders, to implement robust processes and procedures to combat financial crimes. A multi-stakeholder approach is crucial for success in this fight. Accountable Institutions are at the forefront, and by adhering to regulations like the FIC Act, they can play a pivotal role.

However, as highlighted during the conference, FICA compliance is no longer just about collecting an ID and proof of address; it involves multiple intricate steps and processes that, when executed properly, can be time-consuming but are indispensable. This is where FICA software and compliance leader DocFox comes into play, simplifying and revolutionising processes for Accountable Institutions to eliminate discontinuation or failure in processes, combat fraud, and ensure rigorous FICA compliance through its online application software.

Developed in full adherence to South Africa’s FICA regulations, DocFox’s platform equips Accountable Institutions with an effortless yet potent end-to-end solution for meeting their “know your customer” due diligence requirements. Automated checks against national databases such as Home Affairs as well as comprehensive watchlist and sanctions screening enables effective vetting that legacy manual processes simply cannot match.

Adhering to FICA compliance obligations remains an enormous hurdle across many industries. Non-financial businesses such as legal firms and real estate companies are two sectors repeatedly cited as non-compliant. Statistics from the FIC are staggering: around 80% of law practices fail to properly implement FICA’s mandated controls.

With sophisticated tools and automated watchlists integrated into a seamless user experience, DocFox is arming companies across South Africa with a new breed of agility and comprehensiveness for combating financial crime. Coupled with heightened awareness, stronger enforcement by agencies, and collaborative partnerships between government and industry, South Africa can still turn the tide.

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(This article is provided for informational purposes only and not for the purpose of providing legal advice. For more information on the topic, please contact the author/s or the relevant provider.)
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