South Africa

FREEZING OUT CRIME OP-ED

Asset Forfeiture Unit is hitting criminals where it hurts most – nearly R6bn seized this year

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The value of freezing orders climbed from R1.028-billion in 2021 to R5.832-billion this year. At the same time, the value of recoveries increased from R111-million to R281-million.

South Africa’s Asset Forfeiture Unit (AFU) is showing increasing success in cracking down on corruption – particularly in recovering ill-gained assets from those involved in crime.

The AFU, a branch of the National Prosecuting Authority (NPA), has achieved a 99% success rate in the past financial year, with the value of freezing orders climbing from R1.028-billion in 2021 to R5.832-billion in 2022. At the same time, the value of recoveries increased from R111-million to R281-million.

The breadth of the AFU’s activities gives some insight into the scale of criminal activity that the NPA as a whole is dealing with, as well as providing insight into criminals’ methods. Among the most notable cases handled by the AFU in the last financial year related to the Guptas’ involvement with Tegeta Exploration and Optimum Colliery.

Asset Forfeiture Unit
Officials from the South African Revenue Service, the Asset Forfeiture Unit and the Hawks raid the Gupta compound in Saxonwold, Johannesburg on 16 April 2018. (Photo: Gallo Images / Netwerk24 / Felix Dlangamandla)

In March 2022, the Investigating Directorate (ID)/AFU obtained two preservation orders in one of the largest State Capture cases, relating to the purchase of the Optimum Coal Mine and Optimum Coal Terminal by Tegeta Exploration and Resources, a Gupta family-linked company.

The mine was bought with the proceeds of crime – including corruption by Eskom officials, who approved and paid an unprecedented amount, and money stolen from state-owned enterprises (SOEs).

Prosecutors reference several cases where a crime boss smiled when he received a 20-year sentence but literally burst into tears when his favourite Rolls-Royce was seized

The first preservation order was for the coal mine and the terminal, and the second for claims on undelivered coal lodged by Templar Capital. The value of the first order (R2.4-billion) does not include the valuation of the mine. The total value of the orders is expected to exceed R8-billion once this has been done.

Even excluding the valuation, this is the largest cumulative preservation order in the AFU’s history and a major achievement in the fight against State Capture.

It is worth noting that, given the level of public interest in the Guptas’ activities, the AFU obtained another significant recovery against Tegeta in 2018, relating to the Optimum Mine Rehabilitation and Koornfontein Rehabilitation trusts. Tegeta acquired control of the trusts as part of an agreement with Glencore.

In terms of the Mineral and Petroleum Resources Development Act and the National Environmental Management Act, all mines are required to reserve a portion of their profit for the future rehabilitation of the mine and surrounding area. These funds may not be used for any other purpose. However, in this case, as soon as Tegeta bought the mines the rehabilitation funds were unlawfully transferred to the Bank of Baroda (another key entity in the State Capture cases).

The AFU obtained a preservation order on 8 March 2018 and when the matter was finalised on 26 April 2018, more than R1.9-billion was returned to the government.

Other significant cases handled by the AFU in the last financial year are:

Nulane/Sharma: Nulane Investments 204 (Pty) Ltd was appointed as a service provider to the Free State department of agriculture in October 2011. The appointment was based on fraudulent misrepresentations made by Nulane and its representatives, Iqbal Sharma and Dinesh Patel, acting in concert with officials in the department. The fiscus was defrauded of almost R25-million. A restraint in the amount of R47.2-million was obtained. The criminal matter is ongoing.

ML Mohapi, Superior Quality Trading, SS Dlamini: A businesswoman acted in concert with officials in the Free State department of agriculture and fraudulently and corruptly obtained a tender for her company, Superior Trading. Fraudulent black economic empowerment certificates and other documents were submitted, which formed the basis for the appointment. The tender was for R200-million but the company was paid about R249-million. Payment was made without some services being received, and the AFU obtained a restraint for R45-million. The criminal matter is proceeding.

Milongani Eco Consulting: This matter involves fraud and corruption at Nelson Mandela Bay Municipality, where a R26-million tender was awarded to Milongani Eco Consulting for an environmental impact assessment. The money was paid, but services were not rendered. The AFU obtained a preservation order for R11-million. The matter is proceeding.

David Valero and others: This matter involves fraud at the Ekurhuleni Municipality in Gauteng. The winning bidding company did not disclose that it had interested family members on the tender committee when it obtained a tender of R21.8-million. The majority of the money was spent on luxury vehicles and trucks. The AFU obtained a confiscation order to the value of R4-million.

B Moraka: This matter involved fraud and corruption committed at Eskom. The accused was a former Eskom employee who colluded with an outside service provider to defraud Eskom of R35-million. A provisional restraint order was obtained on 9 November 2021 and the ruling was confirmed on 15 February 2022. Both accused pleaded guilty to the charges and a confiscation order was obtained against both of them. Both were sentenced to an effective 20 years’ imprisonment.

The AFU also had successes in a number of other noteworthy matters, involving a wide range of criminal activities, from smuggling gold in a whisky box to dealing in drugs, defrauding the government and avoiding customs on imported chickens.

These cases include:

L Gumede: He defrauded the Unemployment Insurance Fund (UIF) by submitting false claims through his company for Covid-19 Temporary Relief Scheme (Ters) benefits between April and November 2020. As a result, the UIF lost about R11-million. Assets to the value of R5.9-million, including cash held in various bank accounts, two immovable properties and a vehicle, are under preservation, pending forfeiture.

Impossible Solutions: In a similar case, the company submitted fraudulent Ters claims to the UIF. The AFU obtained a forfeiture order in the amount of R111.9-million on 7 December 2021 and paid R114-million to the victim.

Masinire T: On 8 May 2021, the Zimbabwean was arrested at OR Tambo International Airport in possession of 23 pieces of unwrought gold, after he had entered South Africa from Zimbabwe. The suspect failed to declare the gold to customs and it was found hidden inside a Johnnie Walker Red Label whisky box. The gold was valued at R9.3-million and is currently subject to a preservation order, pending forfeiture.

Egenamba M: The matter concerns email fraud perpetrated on victims in the US between August 2020 and February 2021. The victims were defrauded into paying $38-million into the perpetrators’ US bank accounts, subsequently transferred into two bank accounts held in South Africa by a Nigerian citizen and an entity controlled by him, respectively. The investigation revealed that various entities in the US and in South Africa were created ostensibly to commit these crimes. Property to the value of R7.7-million is under preservation, pending forfeiture.

Vuma C: This falls within a bouquet of South African Airways (SAA) corruption matters. It involves the theft of aircraft parts to the value of R5.1-million by former SAA employees. A provisional restraint order was obtained against one of the accused on 5 July 2021 and confirmed on 31 August 2021. The criminal trial began at the Kempton Park Regional Court on 2 June 2022.

Mahamodo: Mahamodo and two others were arrested en route to Dubai via Ethiopia from Madagascar. They were arrested at Fireblade Aviation Oppenheimer & Son Airport near OR Tambo International for failure to declare 38 unwrought gold bars worth R62.7-million that were found in their possession.

Jerome Booysen (Project Fenix): The AFU obtained a preservation order for R30.852-million on 22 April 2021 in a matter involving drug dealer Jerome (Donkie) Booysen, who manufactured, distributed and dealt in drugs in the Western Cape, in conjunction with his syndicate members. The proceeds from dealing in drugs were preserved and the forfeiture process is ongoing.

Correia matter: A preservation order was obtained against the perpetrator after they offered an R800,000 bribe to SAPS officials when they were caught avoiding customs duties and anti-dumping duties. The perpetrator was apprehended during a sting operation while they were paying the bribe. The money was preserved on 16 March 2022.

Nhlanhla Malinga/Project Neutron: This matter involves theft from Transnet fuel pipelines in KwaZulu-Natal. The AFU obtained a preservation order for the truck/tanker used to transport the stolen fuel. The order was obtained on 14 September 2021 for R2.9-million.

Izizi matter: This matter involves tax fraud in East London. Fraudulent VAT claims were submitted, on the strength of which SARS paid VAT refunds. The AFU obtained a restraint in the amount of R9.52-million on 8 March 2022. The criminal matter is proceeding.

Sunny Penny matter: This involves the laundering of money stolen from the Lesotho government, with the funds moving through South African bank accounts. The AFU obtained a preservation order for R18.6-million on 12 October 2021. The money was forfeited on 24 March 2022 and was returned to the Lesotho government on 3 June 2022.

Seloana and others: The accused kidnapped the wife of a mine manager and demanded a bar of gold for her release. The mine supplied the bar, which was exchanged for the kidnapped victim. The gold and cash that the gold was sold for were seized as the proceeds of crime. The AFU obtained a forfeiture order in the amount of R4.9-million on 2 September 2021 and R1.4-million has been repaid to the victim so far. Further recovery is ongoing.

Strengthened partnerships

The AFU has obtained freezing orders for more than R21-billion since its establishment in 1999, with R11-billion either forfeited or seized.

The unit is recognised internationally as a centre of excellence in asset recovery, and contributes significantly to building capacity in Africa. It is also a member of the Asset Recovery Inter-agency Network of Southern Africa, a regional body aimed at sharing intelligence across borders. It is constantly enlarging the scope of its international cooperation with financial institutions to ensure mutual legal assistance and the exchange of information.

Read in Daily Maverick: “Asset Forfeiture Unit deals devastating blow to Regiments Capital trio

It specifically targets unexplained wealth, while also participating in the activities of the Financial Action Task Force and the Anti-Corruption Task Team. The AFU is firmly focused on the government’s Top  10 Case Priority Case Project, the Health Sector Anti-Corruption Forum and the Inter-Agency Working Group on Illicit Financial Flows.

Officials from the South African Revenue Services (SARS), the Asset Forfeiture Unit (AFU) and the Hawks raid the Gupta compound at Saxonwold on 16 April 2018 in Johannesburg, South Africa. (Photo: Gallo Images / Netwerk24 / Felix Dlangamandla)

The proceeds of AFU activities are either paid to victims of crimes or into the Criminal Assets Recovery Account and used to bolster the fight against crime.

The Prevention of Organised Crime Act (Poca) provides two options for seizing the property of criminals:

  • Conviction-based forfeiture, under Chapter 5 of Poca, in which the state obtains a money judgment (confiscation order) against the accused for the amount of the benefit of the crime. There is no need to show that the assets are proceeds of crime. A restraint order may be obtained before conviction to seize property pending conviction, acting as a means to secure property and make it available to satisfy a later confiscation order. In addition, property that can be used to pay a confiscation order is not limited to that owned directly by a criminal. It includes property that is held indirectly and affected gifts that may have been made by the defendant; and
  • Non-conviction-based forfeiture, under Chapter 6 of Poca, which can be obtained through a civil order – in other words, without there needing to be a criminal conviction against the owner first. In this case, the State has to prove that the assets are tainted or “dirty” – in other words, that they’re either the proceeds of crime/associated with terrorist and related activities or have been concerned in the commission of a crime. Proceeds of crime can be the direct proceeds, or property representing the proceeds. This type of forfeiture is advantageous in that it does not require a conviction and is usually a speedier process.

Going after the benefits is increasingly recognised as one of the major weapons against organised crime, and asset recovery is now a global phenomenon in the fight against crime.

It has an important deterrent effect by hitting criminals where it hurts most – in the pocket. Many criminals see jail as an occupational hazard, but expect to be well-off when they come out. Prosecutors reference several cases where a crime boss smiled when he received a 20-year sentence but literally burst into tears when his favourite Rolls-Royce was seized, his family lost their home and the children lost their expensive private education.

In the past 30 years, more and more countries have realised that the only way to deal with crime effectively is to ensure that “crime does not pay”. This has led to a much greater focus on the benefits that criminals derive from crime, which includes property and large amounts of money. DM

Advocate Priya Biseswar is Special Director of Public Prosecution at the Asset Forfeiture Unit within the National Prosecuting Authority. She inter alia represents South Africa at the United Nations Convention Against Corruption, the Financial Action Task Force, the Organisation for Economic Development and Cooperation, BRICS, G20 and, on behalf of the NPA, serves as the secretariat of the Asset Recovery Inter-Agency Network of Southern Africa.

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