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South Africa faces 'perfect storm' of financial crime, ready to 'fight back'


South Africa faces 'perfect storm' of financial crime, ready to 'fight back'
03-07-24 / Tommy Jackson

South Africa faces 'perfect storm' of financial crime, ready to 'fight back'

Cape Town - South Africa is grappling with a "perfect storm" for rampant financial crimes like money laundering and fraud that are going widely under-reported and under-prosecuted, said Chad Thomas, CEO of IRS Forensic Investigations, at a Fighting Financial Crime conference hosted by compliance solutions leader DocFox in Johannesburg earlier this month.

"South Africa has exceptionally low conviction rates for even the most heinous violent crimes like rape and murder," Thomas said. "As a result, criminals rightly feel there will be little to no consequences for financial crimes either. This emboldens them, contributing to the escalating kidnapping rates in South Africa. Organised syndicates have commanded ransoms reaching into the tens of millions of rands."

The cost of financial crime is staggering, with estimates that money laundered globally each year amounts to 2-5% of world GDP—$800 billion to $2 trillion. Yet in South Africa, much white-collar crime goes undetected or unaddressed because of limited resources for investigation and enforcement.

"We know people lost their life savings or were driven to suicide by fraud, but many cases simply go unreported out of embarrassment," Thomas said. "Other countries increasingly treat financial crime as the national security threat it is, but South Africa hasn't prioritised it adequately amid the burden of violent crime."

He highlighted key agencies like the Hawks are operating at half their required capacity, with financial crime case backlogs stretching over five years due to budget and staffing constraints. "Greater political will and collaboration across public and private sectors are needed to finally get ahead of these crimes," Thomas urged.

Alarming statistics like these underscore the urgency for organisations and individuals, such as the FIC and other industry leaders, to implement robust processes and procedures to combat financial crimes. A multi-stakeholder approach is crucial for success in this fight. Accountable Institutions are at the forefront, and by adhering to regulations like the FIC Act, they can play a pivotal role. 

However, as highlighted during the conference, FICA compliance is no longer just about collecting an ID and proof of address; it involves multiple intricate steps and processes that, when executed properly, can be time-consuming but are indispensable. This is where FICA software and compliance leader DocFox comes into play, simplifying and revolutionising processes for Accountable Institutions to eliminate discontinuation or failure in processes, combat fraud, and ensure rigorous FICA compliance through its online application software.

"Our web-based platform provides more identity authentication and fraud detection than just paper documentation," said Hawken McEwan, Director of Risk and Compliance at DocFox, the organiser of the Fighting Financial Crime conference. "Automated checks against national databases such as Home Affairs as well as comprehensive watchlist and sanctions screening enables effective vetting that legacy manual processes simply cannot match."

Developed in full adherence to South Africa's FICA regulations, DocFox's platform equips Accountable Institutions with an effortless yet potent end-to-end solution for meeting their "know your customer" due diligence requirements. The platform simplifies and accelerates document submission while validating identities, analysing for high-risk factors, and archiving audit trails – all to ensure stringent legal compliance, drive efficiency, and stop financial criminals in their tracks.

Adhering to FICA compliance protocols remains an enormous hurdle across many industries. "Non-financial businesses such as legal firms and real estate companies are two sectors repeatedly cited as non-compliant with the law's Accountable Institution requirements," stated McEwan. Statistics from the Financial Intelligence Centre are staggering: around 80% of law practices fail to properly implement FICA's mandated controls. 

"Financial crimes devastate lives and cripple economies, but many in South Africa still don't grasp the magnitude of this rapidly-metastasising threat," McEwan added. "We take pride in leading the vanguard of purpose-built solutions for the digital age, aiming to finally get ahead of these predators."

With sophisticated tools and automated watchlists integrated into a seamless user experience, DocFox is arming companies across South Africa with a new breed of agility and comprehensiveness for combating financial crime. Coupled with heightened awareness, prioritisation, and enforcement from public-private partnerships, the nation can still turn the tide.

"If not addressed, financial crimes such as fraud and money laundering will spread further in South Africa's public and private sectors, endangering the nation's financial integrity and legal system," McEwan warns. "To combat these threats effectively, a united effort is essential, combining advanced technology like DocFox's platform, stronger enforcement by agencies, and collaborative partnerships between government and industry."

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