Financial Crime World

Financial Crimes Pose Grave Threat to South African Society and Economy

The Impact of Financial Crimes in South Africa

South Africa’s high crime rate is not only a major concern for its citizens but also has a significant impact on the country’s economy. According to the FATF Mutual Evaluation of South Africa 2021, financial crimes account for approximately 19% of the country’s GDP.

Types of Financial Crimes in South Africa

  • Domestic proceed-generating crimes include:
    • Tax evasion or fraud
    • Corruption and bribery across various levels of entities and private procurement
    • Fraud schemes such as Ponzi and digital banking scams
  • The country also serves as a market and transit point for:
    • Drug trafficking
    • Environmental crimes like poaching and illegal mining

Vulnerability to International Criminal Networks

South Africa’s critical role as the financial hub in southern Africa makes it vulnerable to international criminal networks that use the country as a route for illicit goods, human smuggling, and laundering of proceeds through the abuse of legal persons and corporations.

Effective Measures to Combat Financial Crimes

Implementing effective Anti-Money Laundering (AML) and Counter Terrorism Financing (CFT) measures by all stakeholders in the economy is key to stopping and reducing criminal activities in South Africa. This includes:

  • Complying with legal AML/CFT obligations
  • Understanding risk exposure
  • Implementing adequate mitigating measures to construct a trustworthy ecosystem

The Importance of Trust and Collaboration

When one entity fails to comply with its AML/CFT obligations, it facilitates and motivates the commission of more crimes by exposing other entities to illicit money that is laundered, used, and enjoyed by criminals. Therefore, every institution must trust other institutions’ controls on transferred funds and shared business relationships to ensure they are not connected to criminal activities.

Combating Financial Crimes in South Africa

To effectively combat financial crimes in South Africa, it is crucial for all stakeholders in the economy to work together to prevent criminals from profiting from their illicit activities and financing further plans. This can only be achieved by implementing robust AML/CFT measures that promote a trustworthy ecosystem where institutions can rely on each other’s controls.