South Africa’s Banking Industry Under Fire for Financial Crime Epidemic

The Devastating Impact of Financial Crime on South Africa

A staggering 19% of South Africa’s GDP is consumed by crime, with the country facing a high crime rate that threatens its society, people, and economy. According to the Financial Action Task Force (FATF) Mutual Evaluation report 2021, more than half of reported crimes in South Africa are proceed-generating crimes, which violate citizens’ lawful rights and livelihoods.

Domestic Proceed-Generating Crimes in South Africa

• Tax evasion and fraud
• Corruption
• Bribery
• Digital banking scams
• Cybercrimes involving virtual assets
• Drug trafficking
• Environmental crimes such as poaching and illegal mining

The Country’s Vulnerability to International Criminal Networks

South Africa’s critical role as a financial hub in southern Africa makes it vulnerable to international criminal networks. The country’s businesses are being used as transit routes for illicit goods and human smuggling, while the laundering of illicit proceeds is facilitated through the abuse of legal persons and corporations.

Combating Financial Crime: A Collective Responsibility

To combat these crimes effectively, Anti-Money Laundering (AML) and Counter Terrorism Financing (CFT) measures must be implemented by all stakeholders in the economy. Every institution must comply with its AML/CFT obligations, understand its risk exposure, and implement mitigating measures to construct a trustworthy ecosystem.

The Importance of Cooperation

When one entity fails to comply, it facilitates and motivates more crimes by exposing others to laundered money that is enjoyed by criminals. By working together, South Africa’s banking industry can reduce financial crime and build trust in the economy.