SA crime-fighting agencies are engaged in a mammoth battle against the corruption that pervades society. They need as much armour in their arsenal as possible.
The Zondo commission of inquiry into state capture has exposed how deep the rot is in every nook and cranny of the economy, whether in the realm of procurement by organs of the state or in the sphere of the so-called coal and construction mafias.
So the revelation by SA Revenue Service (Sars) commissioner Edward Kieswetter that there is strong support among agencies fighting corruption for a law that enables the investigation of unexplained wealth is to be welcomed. This will allow entities such as the Financial Intelligence Centre (FIC) and the Hawks to probe the accumulation of assets by individuals to a value that is disproportionate to their declared sources of income. It will also facilitate an interagency response and has been encouraged by experts from the Organisation for Economic Co-operation and Development (OECD).
Support for the move was expressed at a Sars-hosted event in July that included Sars, the Treasury, National Prosecuting Authority (NPA), the Hawks, the FIC, the Financial Sector Conduct Authority, the Reserve Bank and the Special Investigating Unit.
The UK, Australia and Ireland have just such a law to deal with unexplained wealth. While the UK and Australia have had limited success, Ireland’s legislation is credited with having significantly disrupted economic crime.
Under the UK law on unexplained wealth courts can hand down orders that require the target to explain how they obtained their wealth. If they fail to comply, law enforcement authorities can apply to the courts for a civil recovery order which permits the confiscation of the assets.
There is no requirement to prove that such assets were obtained from criminal activity, only that on the balance of probabilities unlawful conduct has occurred. Further reforms were introduced in 2022 to make unexplained wealth orders easier to obtain, enforce and monitor in order to deal with the UK assets of Russian oligarchs after the invasion of Ukraine.
SA does have the Prevention of Organised Crime Act, which provides that property obtained by means of criminal activities may be forfeited to the state. The Asset Forfeiture Unit of the NPA — the agency responsible for implementing the law — has had some success. However, it can only act once a crime has been established, not in advance of a court case, which is the point of unexplained wealth orders.
As Kieswetter says, almost every economic crime has a tax angle. He notes that in 2021 Sars identified 26,000 individuals engaged in economic activity worth more than R1m who were not registered as taxpayers. An unexplained wealth order regime would therefore also unearth tax evaders whose noncompliance undermines the already limited tax base required to socially support millions of destitute jobless.
The trouble is that however strong the arsenal, it needs capacity and resources to deploy. This is sorely lacking in SA’s law enforcement agencies, which were hollowed out during the years of state capture and have suffered along with other organs of state from budgetary constraints. Existing capacity and resources fall far short of what is required for a full-on assault against widespread economic crime, not to mention other kinds of crime such as murder or robbery. It is no wonder that law enforcement agencies such as the NPA have been accused of acting too slowly to bring those responsible to court.
Nevertheless, having a strong legislative regime is also important, especially to meet the international standards for the combating of money laundering and the financing of terrorism laid down by international body the Financial Action Task Force (FATF). The force has highlighted deficiencies in SA’s regime, particularly with regard to law enforcement and prosecution. The FATF will take a decision early in 2023 on whether SA should be put on a grey list of high-risk countries, which will have dire consequences for the economy, especially the financial sector.
Also important is strong collaboration between law enforcement and regulatory authorities. It is encouraging that the OECD experts have acknowledged that SA is on the right track in this regard.
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