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Money-laundering is performed to thwart the enforcement of criminal law by creating a justification for controlling or possessing money or property derived from any form of criminal activity. This includes all activities aimed at disguising or concealing the nature or source of, or entitlement to money or property derived from criminal activities. The process of money-laundering comprises:
- the placement stage where the illegitimate proceeds are placed in the financial system;
- the layering stage where numerous transactions are carried out with the proceeds; and
- the integration stage where the recycled proceeds are placed at the disposal of the criminal.
Organised criminal groups need to launder their illegal profits to avoid detection of the underlying criminal activity that generates the profits, while enjoying these profits or reinvesting them in future criminal activities.
By combating money-laundering, law enforcement authorities can disturb the cycle utilised by organised criminal groups to benefit from illegitimate profits. This can enable law enforcement authorities to disrupt the functioning of organised criminal groups through financial turmoil.
Globally, South Africa has one of the broadest ranges of money-laundering offences on its statute books. This is due to the fact that any underlying criminal activity can give rise to a charge of one of the money-laundering offences.
The money-laundering offences are contained in the Prevention of Organised Crime Act of 1998. These are money-laundering, assisting another to benefit from the proceeds of unlawful activities, the acquisition, possession or use of the proceeds of unlawful activities, and the failure to report suspicion regarding the proceeds of unlawful activities.
South Africa also has a structure for the recovery of the proceeds of criminal activity that is far advanced in terms of available models. The South African model comprises a conviction-based confiscation procedure, as well as a so-called civil forfeiture procedure without requiring a conviction.
The picture of South Africa’s legal response to money-laundering is not yet complete. A system of administrative measures to control money-laundering and to facilitate its prevention, detection, investigation and prosecution is still lacking.
The elements of an administrative money-laundering control structure are customer identification, recordkeeping, reporting of information, and formulating internal policies on these elements by the institutions concerned.
Another element of crucial importance is the establishment of a financial intelligence unit. Such a unit should serve as a conduit for information from institutions in the private sector to law enforcement authorities. At the same time, the unit should add value to the information passed on to law enforcement authorities by performing an analysis of the reported information.
A bill on the establishment of a financial intelligence unit and money-laundering control measures is in process. Elements of this bill that will most probably find their way into the final statute are the establishment of a Financial Intelligence Centre, the money-laundering control measures referred to above, and the administrative enforcement of the bill.
The implementation of these measures is, broadly speaking, the task of the investigating and prosecuting authorities. Within these groupings, there are a number of institutions that can become involved in money-laundering investigations linked to organised crime.
In the South African Police Service, the investigation of organised crime is the task of the detective service. This service comprises a number of components. Of these components, it is mainly the Commercial Branch and the Component: Organised Crime that will deal with money-laundering investigations. Investigations of criminal activity linked to organised crime will mainly be carried out by the Component: Organised Crime, the Component: Specialised Investigations, the Component: Serious and Violent Crimes and the Commercial Branch.
The National Prosecuting Authority comprises offices of Directors of Public Prosecutions for each seat of the High Court. Any of these Directors may institute prosecutions concerning money-laundering and organised crime activities. Apart from the offices of the Directors of Public Prosecutions, there is also the office of the National Director of Public Prosecutions. This office includes the Investigating Directorates for Serious Economic Offences and for Organised Crime, the Asset Forfeiture Unit, and the Directorate for Special Operations.
Increased use is made of specialised, multidisciplinary investigative teams. These teams focus their investigations mainly on specific organised criminal groups, rather than specific criminal activities. This allows them to conduct their investigations proactively instead of only reacting to crimes that have already been committed. The South African Police Service, as well as some of the prosecuting authorities such as the Directorate for Special Operations use this approach. The teams involved in such investigations typically comprise investigators and public prosecutors and may also include other experts such as forensic accountants.
Legislation concerning money-laundering, organised crime and the confiscation or forfeiting of the proceeds of criminal activity contains a wide variety of instruments to address these phenomena. These measures compare favourably with international standards and with some of the most advanced examples of similar measures in other countries.
The law is still lacking with regard to administrative money-laundering control measures. South Africa’s current provisions fall short of the international standard set by the 40 recommendations of the Financial Action Task Force. It is hoped that the enactment of the Financial Intelligence Centre Bill will go some way to address this shortcoming.
The introduction of the statutory provisions against money-laundering and organised crime has gone hand-in-hand over the past five years with the restructuring of the authorities concerned with their implementation. This restructuring has included the creation of new roleplayers such as the Asset Forfeiture Unit and the Director of Special Operations in the office of the National Director of Public Prosecutions, and the Component: Organised Crime in the SAPS detective service.
The fact that a variety of institutions will have overlapping responsibility for the same type of investigations holds an inherent danger of conflicts between the institutions concerned. This may lead to a duplication of efforts and spending of resources while reducing positive results. Careful co-ordination of activities and continuous communication between the roleplayers will be essential to avoid such conflicts. It may even be necessary to consider greater centralisation of the co-ordination of activities between these institutions.
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