Several agencies involved in fighting corruption have agreed that SA needs legislation that would allow them to investigate unexplained wealth.
Experts from the Organisation for Economic Co-operation and Development (OECD) who participated in a workshop with the heads of these agencies last month have encouraged them to pilot and test the proposals on unexplained wealth, which refers to the possession of assets with a value far in excess of a person’s declared income.
In the UK, courts can issue an order that compels the target to reveal the sources of their unexplained wealth.
SA Revenue Service (Sars) commissioner Edward Kieswetter said in an interview at the weekend that while the tax authority had ways to investigate unexplained wealth by using algorithms to look at information such as property, motor vehicle and beneficial ownership, its investigations were limited to tax audits under the Tax Administration Act. It cannot conduct a fishing expedition.
Having a separate law in place would allow other agencies, such as the Financial Intelligence Centre (FIC), to investigate unexplained wealth and for there to be an inter-agency response.
“There is strong support between the agencies to finalise a proposal and present it for consideration,” Kieswetter said.
He noted that last year Sars identified about 26,000 individuals who demonstrated economic activity above R1m a year who had not registered as taxpayers.
The agencies represented at the three-day workshop hosted by Sars included the Treasury, the National Prosecuting Authority (NPA), the Hawks, the FIC, the Financial Sector Conduct Authority, the Reserve Bank and the Special Investigating Unit (SIU). About 40 officials attended, including Kieswetter, national director of public prosecutions Shamila Batohi and the head of the Hawks, Godfrey Lebeya.
The OECD experts shared their global experience in fighting economic crimes and facilitated a critical self-assessment by the agencies of the effectiveness of the collaboration between them.
Kieswetter said the assessment “revealed a positive emerging strategic shift towards embedding the national financial intelligence system” brought about by greater collaboration, information sharing and effective project management. This was applauded by the OECD representatives, who urged that information gateways between the agencies be strengthened.
The OECD flagged the Fusion Centre as an emerging best practice that could ideally be extended to combat money laundering. The Fusion Centre — comprising the FIC, the Independent Police Investigative Directorate, NPA, Hawks, SIU, State Security Agency and Sars — was set up in 2020 initially to deal with Covid-related corruption but has become a permanent structure for collaboration to deal with white-collar crime, organised crime and corruption. Participants share information and resources, with the FIC playing a pivotal role in sharing financial intelligence with member law enforcement and investigative agencies.
Partnership
The OECD complimented the work of the SA Anti-Money Laundering Integrated Taskforce, which is a private-public partnership aimed at combating financial crimes. It is led by the FIC and comprises the relevant law enforcement and regulatory entities, and the banks.
“They said we were on the right track and should continue to build on what we have,” Kieswetter said, adding that more remained to be done to combat tax crimes, illicit financial flows, money laundering and terror financing.
Data analysis and co-ordination could be improved.
“Unless these agencies collaborate and work together, we will not be able to win this war against state capture-related crimes and other sorts of economic crimes,” Kieswetter said.
“By working together, we can prioritise the high-impact cases and can share information.”
State capture
A key challenge facing the agencies, he noted, was that their capacity had been eroded by state capture and had to be rebuilt. And they lacked the necessary resources. This affected the speed at which they can work, but progress was being made.
Collaboration by institutions involved in fighting money laundering and the financing of terrorism needs to be strengthened in a bid to ward off greylisting by the Financial Action Task Force (FATF), an international body that sets standards for this and is due to make a decision early next year as to whether SA’s legislative system and enforcement regime complies with the standards. Shortcomings in SA’s ability to combat money laundering and terrorism financing were laid out in an evaluation report by the FATF in October 2021.
Kieswetter noted that Sars’s investigations into individuals highlighted in the Zondo commission report on state capture — and begun several years before the report was published — as well as into those involved in other economic crimes were far advanced. Several had favourable outcomes for Sars in court, while other matters had been handed over to the Hawks and the NPA. Those people will appear in court soon.
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