South Africa is making mixed progress in its efforts to curb trade-based financial crime.

The country has been removed from the targeted follow up process initiated by the Financial Action Task Force (FATF) eight years ago, but the scale of the problem South Africa faces in respect trade-based financial crime is huge and the authorities may lack the capacity to tackle it.

FATF decision

The FATF at its plenary meeting held in Buenos Aires, Argentina in November removed South Africa from its targeted follow up process.

Under this process, South Africa was required to report to every FATF plenary on the progress made in addressing deficiencies identified in the 2009 Mutual Evaluation Report in respect of customer due diligence and record keeping measures.

FATF took note of the fact that several provisions of the Financial Intelligence Centre Amendment Act had come into operation in October 2017 together with substantial amendments to money laundering and terrorist financing regulations and the withdrawal of all exemptions under the Financial Intelligence Centre Act.

Lacking capacity

But trade-based financial crime is a big issue, even featuring at the ANC’s 54th National Conference, which ends today.

The CEO of Investec Bank, Richard Wainwright, told delegates that the South African Revenue Service (SARS) lacks the internal capacity to curb illicit financial flows, transfer pricing and trade misinvoicing.

“It’s fairly common knowledge that [SARS’] institutional skill base needs to be rebuilt,” he said.

Massive problem

The director of the Financial Intelligence Centre, Murray Michell, outlined the scale of South Africa’s problem with trade-based financial crime earlier this year.

He told a sitting of parliament that about nine million suspected transactions were reported to the centre in the 2015-16 financial year.

According to Michell, about 2,490 products worth some US$4.6 billion were illicitly traded.

Categories: Trade Based Financial crimes News