Johannesburg - To shake off the global greylisting status that the Financial Action Task Force (FATF) slapped South Africa with this week, President Cyril Ramaphosa must crack the whip on law enforcement agencies, government insiders say.
Among the indicators assessed by the FATF, an international financial crime watchdog, is "the efficacy of the criminal justice system and the global body is impatient with our criminal justice system," said a Treasury official on condition of anonymity.
On Wednesday, during the budget speech, Finance Minister Enoch Godongwana acknowledged "the need to be more effective in implementing our laws, particularly in fighting organised and sophisticated crimes”.
But Ramaphosa would also have to first look into his Phala Phala closet, according to critics, as the money laundering allegations against him continue to make global headlines.
It has come to light that three years ago, he allegedly stashed an undisclosed amount of American dollars – estimated to be between $4 million and $8m – in a sofa for two months before it was stolen at his game farm in Limpopo.
Opposition parties have noted that more than nine months since the alleged financial crime was reported to the police last year in June, all relevant institutions including the Hawks, the National Prosecuting Authority (NPA), the SA Revenue Services (Sars), the SA Reserve Bank (SARB) and the Office of the Public Protector, are yet to produce a report on the outcome of investigations.
The FATF is an inter-governmental organisation that underpins the fight against money laundering and terrorism financing by setting global standards and checking if countries respect them.
The greylisting status meant that the cost for South Africa's entities to transact with the rest of the world would be higher – where funds flowing from out of the country would be viewed with more suspicion.
For its part, Treasury has been pumping money into law enforcement agencies to address the complaints of lack of capacity and critical skills. On Wednesday, Godongwana set aside R1.3 billion for the NPA, meant “to support the implementation of the recommendations of the State Capture Commission and the FATF”.
The NPA has come under criticism for being big on public relations stunts related to politically charged cases – including being weaponised to serve the interests of the powerful political elite – but thin on convictions.
"In the FATF’s view, following the long-standing State Capture Commission of inquiry, people should be in jail by now. You can pass the laws, and they are happy, but when people are not being sent to jail it means your institutions are not robust," said another government source.
“What about the Steinhoff case? It has become a complex case that has proven to be beyond the capacity of the state. To date, Marcus Jooste has not been served with any charges. They cannot formulate any serious charges against him because they do not have the capacity,” said the person referring to the former Steinhoff CEO.
Jooste has been under investigation by the Hawks and has yet to be charged in SA's largest private sector fraud scandal. The Steinhoff executives allegedly inflated the group’s profit and asset values by over R100 billion, using a complex web of shell companies and fictitious transactions.
Just this week, the NPA suffered a major blow before the High Court in Bloemfontein when it lost appetite to adduce as evidence the so-called #Guptaleaks – a tranche of emails that allegedly exposed the network of state capture under former President Jacob Zuma.
The R24.9m Free State fraud and money laundering case emanating from a 2011 feasibility study that was carried out by the company, Nulane Investments, has been dubbed the “benchmark” for all other upcoming state capture prosecutions.
Future cases involving evidence obtained from #GuptaLeaks will be affected by this move. More so, these are the documents that the state capture commissions heavily relied on, but may prove to be inadmissible evidence before a court of law.
Treasury also allocated R265 million to the Financial Intelligence Centre (FIC) to tackle organised and financial crime, while the Special Investigating Unit got R100 million “to initiate civil litigation in the special tribunal, flowing from proclamations linked to the recommendations of the State Capture Commission”.
However, Treasury was also blameworthy since it was in the dark about progress in tackling illicit financial flows. In his key performance targets signed with Ramaphosa in December 2020, Godongwana was expected to “reduce illicit financial flows and misuse of tax havens”.
To prevent, track, stop, and recover illicit financial flows, Godongwana had to develop a national policy approach by the end of last year. When asked for progress in achieving the targets, the Treasury ducked and dived.
“The Department cannot answer questions on the performance agreement between the Minister of Finance and the President – such questions should be referred to the Ministry or the Presidency,” the Treasury said last year in April.
A month later in May, Godongwana’s spokesperson Mfuneko Toyana said tracking the illicit financial flows involved several government agencies like Sars, SARB and FIC, “so I’ve been trying to pull that together”. Two months later in July, Toyana said he was following up with Sars and he would “send something in the afternoon,” but to date, he has disappeared.
A government official said that the intergovernmental organisation, Organisation for Economic Co-operation and Development, had proposed a minimum global tax of 15% on every multinational in trying to deal with base erosion and profit shifting.
The effectiveness of the FIC’s Fusion Centre, an alliance of law enforcement authorities and investigative bodies in the Justice, Crime Prevention and Security Cluster and the FIC, was also doubtful.
“They have been meeting. Just like government people meet all the time, but you do not know what they do. Meetings take place but as to whether they produce results you cannot tell,” the source said.
The FATF raised as a red flag that the country should “demonstrate a sustained increase in investigations and prosecutions of serious and complex money laundering and the full range of terrorism financing activities in line with its risk profile”.
Another deficiency the FATF identified was the failure to “demonstrate a sustained increase in outbound Mutual Legal Assistance (MLA) requests that help facilitate money laundering/terrorism financing investigations and confiscations of different types of assets in line with its risk profile”.
Last weekend, the Sunday Independent reported that government entities dealing with the Phala Phala investigation lied over communications with their Namibian counterparts regarding the request for an MLA.
The letter dated July 23, 2020, stated that it was a “request for mutual legal assistance in a criminal matter from the Republic of South Africa: suspected money laundering offences in contravention of the Prevention of Organised Crime Act”.
The letter named some of the five men who were named by former spy boss Arthur Fraser when he opened a case of defeating the ends of justice, kidnapping and torture against Ramaphosa and the head of his Presidential Protection Service, General Wally Rhoode, as the Namibians who stole an undisclosed amount of American dollars from the president’s farm.