Financial Crimes and Money Laundering: A Report from the Financial Intelligence Centre (FIC) of South Africa
Red Flags for Money Laundering
The Financial Intelligence Centre (FIC) has identified several red flags that indicate potential money laundering activities. These include:
- Early liquidation of bonds using lump sum payments: This can be a sign of an attempt to quickly cash out on investments without providing clear justification.
- Payments of long leases by tenants with unsound economic backgrounds: This may indicate that the tenant is not financially capable of affording the lease, but is still able to make large payments.
- Establishment of legal persons to hold properties with the sole purpose of placing a front man between the property and the true owner: This can be used to conceal the true ownership of assets and avoid detection.
- Transactions entered into at values significantly higher or lower than the true value of the property or differing remarkably from market values: This may indicate that the transaction is being used for money laundering purposes.
- Transactions performed through intermediaries acting on behalf of groups of potentially associated individuals (e.g., family or business ties): This can be a sign of an attempt to conceal the true parties involved in the transaction.
- Transactions involving payments in cash or negotiable instruments without stating the true payer: This may indicate that the payment is being made for illicit purposes.
- Transactions where a loan was granted using cash collateral or deposited abroad: This can be a sign of an attempt to launder money by disguising it as a legitimate loan.
Case Studies
Prominent Influential Person
The FIC assisted in identifying properties and entities linked to a foreign prominent influential person suspected of embezzling funds from his jurisdiction’s state coffers. Through financial analysis, the FIC compiled a report that led to a joint application by investigating agencies for restraining and forfeiture of the property.
International Drug Trafficking
The FIC received a request for information on a kingpin in an international drug trafficking syndicate. Financial intelligence revealed large sums of money transferred into South Africa for asset purchases, including properties and a game farm. Outbound funds transfers were also identified. A financial intelligence report was compiled and forwarded to the relevant authorities, leading to seizure of assets valued at R3 million.
Armed Robberies
An investigation into armed robberies led to a request for assistance from the FIC. Financial intelligence revealed the suspect’s involvement with an entertainment establishment, multiple high-value properties, motorbikes, and other vehicles. A financial intelligence report was compiled and forwarded to the relevant authorities, resulting in the suspect’s arrest and lengthy prison sentence, as well as a restraining order ensuring that assets were forfeited to the state.
These cases demonstrate the importance of the FIC’s role in identifying and disrupting money laundering activities within South Africa’s financial system.