The greylisting of South Africa (SA) in 2023 by the Financial Action Task Force (FATF) was a wake up call to many who may not have realised the prevalence of financial crime in the country. South Africans are (unfortunately) well aware of crime in the country, however financial crime in particular may be an unfamiliar topic for some who associate sophisticated crimes with movies. The reality is that financial crime has long plagued SA and what’s more - it is on the rise.

The Reality of Financial Crime in South Africa - DocFox

Fraud - A Rising Trend in South Africa

Financial crime comprises a wide range of illegal activities. One of the major financial crimes scourging SA is fraud. This includes identity theft, credit card fraud, insurance scams, and pyramid schemes. The South African Banking Risk Information Centre (SABRIC) has reported a rise in other forms of fraud, such as digital banking fraud, where victims are deceived into sharing their sensitive information with fraudsters through scams such as ‘vishing’ and ‘phishing’. ‘Vishing’ involves phone calls being made to victims by fraudsters pretending to be officials from reputable companies, such as banks, and tricking victims into sharing personal information, for example, their banking login details. ‘Phishing’ involves emails being sent to victims containing links to fake websites that resemble legitimate websites in order to acquire the victim’s personal information as they navigate the fake site. The Southern African Fraud Prevention Services (SAFPS) has also reported a new trend of criminals targeting banking apps to loot victims’ bank accounts. Fraudulent activities cost individuals and businesses billions of rand annually, eroding trust and hindering economic growth. 

Money Laundering Threats

Money laundering is another significant concern in SA, with criminals using various methods to disguise the origins of illicit funds, such as purchasing high-value assets or funneling money through complex networks. SA’s position as the financial hub in sub-Saharan Africa makes it prone to abuse, as it is exposed to both domestic and international criminal networks in the region. Moreover, SA’s historical ties to organised crime and the drug trade have provided a breeding ground for financial criminals. These criminal networks have infiltrated legitimate businesses, often using them as a front to launder money and funnel illicit funds. In fact, SA has one of the highest organised crime rates in the world, according to the Africa Organised Crime Index 2023, SA has ranked third.

Together with international guidelines, the Financial Intelligence Centre (FIC) have set out the FIC Act which serves as a basic guide / requirement that all Accountable Institutions (AIs) need to follow in order to reduce the risk of facilitating money laundering. In order to combat crime, businesses should identify and assess the risk of all their customers as well as put together an RMCP that will guide all employees. In other words, all employees of AIs should be trained on the anti-money laundering procedures in the business described within the RMCP and have adequate knowledge of FICA itself.

The Impact of Corruption on SA's Financial Landscape

Corruption is another - and perhaps a more well known - form of financial crime present in SA. It may have come as no surprise when SA scored its lowest score on the 2023 Corruption Perceptions Index, especially considering the high-profile corruption scandals the country has seen, such as State Capture. Corruption undermines public trust in government institutions, diverts funds away from essential services, and distorts fair competition. Additionally, corruption facilitates illicit trade, such as when collusion occurs between law enforcement officials and criminals. This highlights the urgent need for stronger anti-corruption measures and improved governance.

It is clear that financial crime has far-reaching consequences for the economy, society and governance, and SA’s complex financial landscape presents an attractive environment for criminals seeking to exploit vulnerabilities. Considering the negative effects of financial crime, and SA’s susceptibility to it, the fight against financial crime in SA has never been more important. 

The Role of Technology in Fighting Financial Crime

Technology has become a critical tool in the fight against financial crimes. From simplifying how businesses onboard their customers, automatically performing ongoing monitoring and risk management to automating mundane tasks, it has become an essential component of any business. 

Utilising digital solutions can help institutions to prevent doing business with high-risk people and entities. By conducting continuous screening, software can identify potential red flags that prompt further investigation.

As an example, DocFox’s watchlist service provides ongoing, reliable, and efficient screening of your customer against a range of international sanctions and watchlists that could indicate potential higher risks to you and your business. Read more here

By recognising the severity of financial crime in SA, strengthening legal frameworks, working with law enforcement and financial institutions, utilising technology and educating the public about the risks and consequences of engaging in illicit activities, we can create a society that is more vigilant and less susceptible to exploitation.

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