Financial Crime World

South Africa’s High Crime Rate: A Threat to Society, Economy, and a Haven for Financial Criminals

South Africa’s crime rate is a significant issue, accounting for approximately 19% of the country’s GDP according to the FATF Mutual Evaluation of South Africa 2021 (FATF report 2021). The consequences of high crime extend beyond societal and individual harm, posing a threat to South Africa’s economy and reputation.

Consequences of Crime

  • Over half of all crimes reported are proceed-generating crimes, infringing upon the rights and livelihoods of citizens for the sole purpose of acquiring illicit proceeds
  • South Africa’s role as the financial and economic hub in the southern African region leaves it vulnerable to both domestic and international criminal networks

Prevalent Criminal Activities

According to the FATF report 2021, the following proceed-generating crimes are prevalent in South Africa:

  1. Tax crimes: Tax evasion and fraud are significant concerns, with corruption and bribery rampant across all levels of entities and private procurement
  2. Fraud schemes: Ponzi schemes, investment fraud, digital banking fraud, and cybercrimes involving virtual assets pose major threats
  3. Transnational crimes: South Africa is used as a market and transit point for drug trafficking and a hub for laundering illicit proceeds through the abuse of South African legal persons and corporations

The Need for Effective AML/CTF Measures

  1. Importance of AML/CTF Measures

    • Prevent criminals from profiting and being rewarded for their illicit activities
    • Reduce and combat crime in South Africa
    • Create a trustworthy ecosystem, ensuring funds transferred between institutions and business relationships are not linked to criminal activities

  2. Responsibility of Economic Entities

    • Comply with their legal Anti-Money Laundering (AML) and Counter Terrorism Financing (CTF) obligations
    • Implement adequate mitigating measures to prevent criminal activities

  3. Multi-Faceted Approach

    • Involves law enforcement, financial institutions, and the government
    • Strengthening AML/CTF frameworks
    • Creating a culture of transparency and accountability in the financial sector and beyond

By addressing these issues with a comprehensive approach, South Africa can effectively combat financial crime and contribute to a more secure and prosperous society.