Johannesburg - The Financial Intelligence Centre (FIC) has confirmed a warning by accounting firm PwC that the incidents of financial crime, including tax-related crime, fraud and money laundering are on the increase in the country.
In response to enquiries following a PwC statement, FIC’s head of communication, Panna Kassan, confirmed that there had been a steady increase in reports submitted by business to the FIC, which included reports of suspicious transactions.
“In the 2013/14 financial year, 883 matters were referred to law enforcement for follow-up. The FIC responded to 1 661 requests for information from national and international law enforcement agencies.
For the same period 355 369 suspicious transaction reports were received,” Kassan explained.
In a statement earlier this week, the accounting firm warned corporate business that financial crime was growing and that globally, financial institutions are also facing a severe financial crime expertise talent shortage.
PwC cautioned that there were not enough skilled people to detect financial crime.
Furthermore, organisations do not have sufficiently effective technological solutions and systems required to uncover improper and unlawful activity.
“The burden on regulated institutions is growing and the need to improve the effectiveness and cost efficiency of prevention and detection systems within them continues to be a major effort,” David Grace, a global financial crime leader for PwC, said.
Supervisory bodies
Kassan said the FIC’s priorities on serious or high-value commercial crime included fraud and theft.
However, there were many other crimes that were not financial in nature that attracted the FIC’s attention, including narcotics, environmental crimes and cybercrime, Kassan added.
The FIC works closely with supervisory bodies that have sectoral oversight of specific accountable institutions.
These supervisory bodies help to monitor and enforce the implementation of the FIC Act by the accountable institutions.
Banking system
PwC said the typical response to increased regulation by financial institutions had been to de-risk.
“Rather than trying to manage risks more effectively, organisations are reducing their risk appetite.
“As a result, firms are moving out of some markets which are seen to be more riskier than others and are terminating some business relationships in an attempt to reduce their exposure to regulatory censure,” Grace explained.
The PwC said the banking system was not the only way in which money laundering and other illicit activities could take place across borders.
Trade-based money laundering – the use of international trade to move value across borders in the form of goods or commodities to disguise the origins of the criminal proceeds – is commonly used by money launderers to move billions in illicit funds across borders.
FIC said proposed amendments to South Africa’s anti-money laundering law, the Financial Intelligence Centre Act (Fica), included customer due diligence and a risk-based approach requiring institutions to understand the risks facing them and to focus their efforts where the risks were higher.
PwC said detecting trade-based money laundering could pose a significant challenge for law enforcement officials.
But if big data analytics are used correctly they can be an effective tool to detect trade-based money laundering and other forms of illegal financial activity.
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