Financial Crime World

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Financial Intelligence: Identifying and Preventing Illicit Activities

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Financial intelligence plays a crucial role in detecting and preventing various forms of illicit activities, including corruption, bribery, procurement fraud, and money laundering. In this article, we will discuss some key indicators of suspicious transactions, cash transactions that raise red flags, and several case studies that demonstrate the importance of financial intelligence.

Suspicious Transaction Indicators

The following are some common indicators of suspicious transactions:

  • Large cash deposits into accounts: Unusual or unexplained large cash deposits into bank accounts.
  • Rapid withdrawals: Frequent or unusual rapid withdrawals from bank accounts.
  • Change in account behavior without explanation: A sudden change in account behavior without a clear reason.
  • Early settlement of asset-based finance (ABF) accounts: Early settlement of loans or other financial obligations related to assets such as property or vehicles.
  • Inconsistent transaction patterns with client profiles: Transactions that do not match the expected behavior of a client based on their profile and history.

Cash Transactions

The following are some cash transactions that raise red flags:

  • Cross-border financial flows through couriers: Large amounts of cash being transported across borders using couriers.
  • Cash purchases of high-value properties or motor vehicles: Purchases of expensive assets using cash.
  • Frequent cross-border travel to high-risk countries: Frequent travel to countries known for high levels of corruption and money laundering.
  • Regular cash deposits below the FIC Act threshold: Repeated small cash deposits that may be an attempt to avoid detection.
  • Use of informal networks like Hawala for transactions: Using unofficial networks for financial transactions.

Case Studies

The following case studies demonstrate the importance of financial intelligence in identifying and preventing various forms of illicit activities:

Corruption

  • The Financial Intelligence Centre (FIC) assisted a neighboring country’s financial intelligence unit in investigating the alleged misappropriation of funds from a state-owned entity.
  • A foreign financial intelligence unit requested FIC assistance regarding corruption related to kickbacks for fishing rights in their country.

Bribery

  • A foreign financial intelligence unit requested FIC assistance regarding corruption related to kickbacks for fishing rights in their country.

State-Owned Enterprises Procurement Fraud

  • The FIC worked with the Special Investigating Unit (SIU) to identify an account suspected of receiving payments due to procurement fraud at Eskom, securing R10.1 million and ordering over R10 million to be forfeited to the state.

COVID-19 Corruption and Money Laundering

  • The FIC analyzed bank accounts related to contractors and service providers irregularly appointed during the acquisition and refurbishment of a hospital, revealing possible concealment of funds.

These case studies demonstrate the importance of financial intelligence in identifying and preventing various forms of illicit activities, such as corruption, bribery, procurement fraud, and money laundering.