South Africa

South Africa

Parliament: MPs frustrated by lack of action on illicit financial flows

Parliament: MPs frustrated by lack of action on illicit financial flows

It’s as clear as mud what exactly South Africa’s law enforcement and regulatory authorities are doing to fight illicit financial outflows, including moving profits out of the country without official permission to minimise domestic tax obligations. On Wednesday the South African Reserve Bank (SARB) told MPs it had referred 110 new cases for investigation to law enforcement agencies since March 2017, while the Hawks talked of 58 cases from previous referrals – and National Treasury highlighted lack of progress in that there has not yet been a single conviction related to illicit financial flows. By MARIANNE MERTEN.

Illicit financial flows (IFFs), which are estimated to have cost South Africa $122-billion between 2003 and 2012, are not a recent topic at Parliament. A joint meeting similar to Wednesday’s was held in September 2015, where responsible agencies had pledged action.

But there was a touch of defensiveness when the Hawks began their presentation to Wednesday’s joint meeting of the committees of finance, trade and industry, police and mineral resources. “Some matters were referred to us by the Reserve Bank. Safely to confirm these matters are on our books,” said Hawks acting priority crimes head Brigadier Mokgadi Bokaba.

It was a direct reference to SARB Governor Lesetja Kganyago expressing his frustration over lack of prosecutions to the finance committee earlier this month. His deputy Kuben Naidoo had told MPs that of the 41 cases logged with the Hawks over the past five or six years there was only one conviction – and that was for bribing a SARB official, not exchange control and other financial regimen violations for having taken R2-billion out of South Africa.

On Wednesday Bokaba’s presentation reflected a total of 58 cases through SARB referrals. The majority were logged in Gauteng (33), followed by KwaZulu-Natal (11), with three each in the Western Cape and Eastern Cape, two in the Free State and one each in Limpopo and Mpumalanga. Only four are headed “finalised in court”, while four were withdrawn and three Gauteng cases were noted “enquiry negative”. There were three cases labelled “finalised in court” – one each in Gauteng, KwaZulu-Natal and Limpopo – but the Hawks’ presentation did not indicate whether these were guilty verdicts, and if so on what charges, or acquittals.

But these statistics did not show the monies involved, or what charges were being investigated, as MPs from the DA, EFF and the ANC and the United Democratic Movement (UDM) quickly pointed out, describing the presentation as “pathetic”, “abysmal” and “disappointing”.

Question should have arisen about the Hawks statistics given that SARB financial surveillance head Thys Basson pointed out that 110 further cases had been referred for investigation since March 2017. And questions should also have arisen over comments by NPA acting specialised commercial crimes unit head, Advocate Malini Govender, that prosecutions were “difficult” if illegal financial flows are not violating the tax legislation. This echoed Bokaba’s opening statement: “There is no crime identified as illicit financial outflows.”

South Africa has a sophisticated monitoring and regulatory network in which banks and other financial institution must report transactions over R25,000, as the Financial Intelligence Centre (FIC) monitors transactions which, if headed out of the country, also need SARB approvals, while the South African Revenue Service (SARS) also has a key role to play in ensuring taxes and customs duties are paid up. Offences related to illicit financial flows are situated in a host of laws from the tax legislation and the Prevention of Organised Crime Act and could include exchange control contraventions, fraud, corruption and money laundering.

On Wednesday the failure to investigate, prosecute and, on guilty verdict, jail offenders rubbed up MPs the wrong way. Across the party political divide questions were raised as to the missing political will to act. Or as finance committee chairperson Yunus Carrim put it: “The NPA says to us ‘What do you want us to do if the investigations that come to us they are not prosecutable’. There is a view you are not investigating not because you don’t have the skills, but you do shoddy work so the NPA can’t proceed.”

Amid officialdom’s carefully chosen polite-speak of multidisciplinary approaches, co-ordinating structures and joint training opportunities that carefully sidestepped identifying bottlenecks and stressing progress instead, National Treasury tax and financial sector policy head Ismail Momoniat decided not to mince his words.

I think we made very little progress and if I’d seen one single case going to court, I would have said we have made progress,” Momoniat said. National Treasury had offered to provide information on, for example, Eskom transactions, but “nobody comes back knocking on our door”.

The #GuptaLeaks, the thousands of leaked emails tracing the connection of the Gupta family, its businesses and associates into the state, including ministers, senior officials and, particularly, state-owned entities (SOEs), hung over Wednesday’s meeting of committees.

With Oakbay Investments last week having sold off not only its media interests but also its Eskom coal contract interests through Tegeta for R2.97-billion, questions have also been raised by, among others, Organisation Undoing Tax Abuse (Outa), over whether members of the Gupta family have fully complied with their tax obligations.

While Momoniat did not name the company expressly, the reference was clear when he raised questions about mines rehabilitation funds that must remain protected now that the company was being sold. “If even a cent of that money has gone overseas that’s like treason,” he said, adding it would be up to National Treasury to come up with the money to replace the losses. “The only way we know something’s happening is if someone appears in court. It is damned frustrating that you don’t hear anything.”

His comments came after acting Hawks head Lieutenant-General Yoliswa Matakata, who frequently smirked during the more than four-hour meeting, had told MPs all cases are being investigated.

In a direct response to DA MP David Maynier, she said “there is an investigation” of his case related of the R30-million generated from public funds to pay for a Gupta family wedding. And Makata also directly replied to ANC MP Derek Hanekom’s question with regards to possible political interference in what the Hawks decided to probe and selective investigations.

We have not, Mister Hanekom, been instructed by anyone to pursue certain cases or not to investigate… We investigate all the cases that are referred to us in the State Capture matter. I have to give progress reports to the Minister of Police. That is being done. He is aware we are investigating,” said Matakata.

But not only MPs were left wondering about arrests, convictions and jail terms as officials from the Hawks, NPA and others sang from the same hymn sheet of co-operation and co-ordination. DM

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