Strengthening Law Enforcement to Address White-Collar Financial Crime in South Africa's Private Sector
DOI:
https://doi.org/10.17159/1727-3781/2024/v27i0a17141Keywords:
White-collar financial crime, Financial Sector Regulation Act, Financial sector regulators, Whistle-blowers, Deferred Prosecution AgreementsAbstract
With the government's focus on combatting public sector corruption and violent crime, the plight of white-collar financial crime in the private sector is of subordinate priority. This contribution seeks to explore means to enhance the capacity of law enforcement agencies to combat white-collar financial crime in the private sector.
We clarify the salient terminology and give an overview of the role of financial sector regulators in financial crime prevention in South Africa, focussing on the Financial Sector Regulation Act 9 of 2017. Financial sector regulators have an important role to play against financial crime, though they are dependent on the criminal justice system to protect the financial sector against criminals. This section is followed by an overview of the role and functions of the South African Police Service, the National Prosecuting Authority, and the court system. We identify difficulties which may hinder the prosecution of white-collar financial crime. First, there is a tendency that companies do not investigate conduct that may amount to white-collar financial crime, and otherwise do not report such incidents. Second, there is a need for a specialised and independent law enforcement agency to attend to serious white-collar financial crime. There is also a skills shortage in the National Prosecuting Authority relative to the intricacies of white-collar financial crime.
As remedial measures, companies ought to apply the corporate governance principles of King IV more robustly. Artificial intelligence can also be utilised to prevent white-collar financial crimes committed in cyberspace. Private sector agencies should be vested with a more comprehensive duty to report white-collar financial crime to the authorities, and the protection and scope of whistle-blowers should be increased. We propose the introduction of Deferred Prosecution Agreements, as well as cooperation between the State and the private sector, to weaken capacity constraints in the prosecution process.
Downloads
Metrics
References
Bibliography
Literature
Abu N The Effects of Corruption and Political Instability on Savings: The Case of Economic Community of West African States (PhD-thesis University of Utara Malaysia 2015)
Altbekker A "A Model for Justice Delivery? The Specialised Commercial Crime Court" 2002 SACQ 31-44
Benson ML and Simpson SS White-Collar Crime: An Opportunity Perspective (Routledge New York 2017) DOI: https://doi.org/10.4324/9781315267609
Blinder AS "Is There a Core of Practical Macroeconomics that We Should All Believe?" 1997 American Economic Review 240-243
Bruce D "Control, Discipline and Punish? Addressing Corruption in South Africa" 2014 SACQ 49-62 DOI: https://doi.org/10.4314/sacq.v48i1.5
Budhram T and Geldenhuys N "A Losing Battle? Assessing the Detection Rate of Commercial Crime" 2017 SACJ 7-18 DOI: https://doi.org/10.17159/2413-3108/2017/i61a2046
Budhram T and Geldenhuys N "Combating Corruption in South Africa: Assessing the Performance of Investigating and Prosecuting Agencies" 2018 Acta Criminologica: African Journal of Criminology and Victimology 23-46
Budhram T and Geldenhuys N "Corruption in South Africa: The Demise of a Nation? New and Improved Strategies to Combat Corruption" 2018 SACJ 26-57
Cheng H and Ma L "White Collar Crime and the Criminal Justice System: Government Response to Bank Fraud and Corruption in China" 2009 Journal of Financial Crime 166-179 DOI: https://doi.org/10.1108/13590790910951849
Chitimira H and Ncube P "The Regulation and Use of Artificial Intelligence and 5G Technology to Combat Cybercrime and Financial Crime in South African Banks" 2021 PELJ 1-32 DOI: https://doi.org/10.17159/1727-3781/2021/v24i0a10742
Cordell CGI "Formulating a New Conception of Corruption through Historical Analysis" 2020 THRHR 562-581
De Man A "Strengthening the Fight against Corruption through the Principle of Accountability" 2022 PELJ 1-30 DOI: https://doi.org/10.17159/1727-3781/2022/v25i0a8341
Dooley DV Sr and Radke M "Does Severe Punishment Deter Financial Crimes?" 2010 Charleston Law Review 619-660
Foodman SI "Considering Bank Fraud" 2006 Banking LJ 794-803
Goga K "Taking Stock of the Last 20 Years. Responses to Organised Crime in a Democratic South Africa" 2014 SACQ 63-73 DOI: https://doi.org/10.4314/sacq.v48i1.6
Gottschalk P "Categories of Financial Crime" 2010 Journal of Financial Crime 441-458 DOI: https://doi.org/10.1108/13590791011082797
Gottschalk P "Characteristics of Financial Crime Investigation Reports by Fraud Examiners" 2014 Journal of Investment Compliance 57-66 DOI: https://doi.org/10.1108/JOIC-04-2014-0014
Gottschalk P Explaining White-Collar Crime: The Concept of Convenience in Financial Crime Investigations (Springer New York 2016) DOI: https://doi.org/10.1007/978-3-319-44986-9
Gottschalk P et al "Information Management for Investigation and Prevention of White-Collar Crime" 2011 International Journal of Information Management 226-233 DOI: https://doi.org/10.1016/j.ijinfomgt.2010.07.002
Hansen LL "Corporate Financial Crime: Social Diagnosis and Treatment" 2009 Journal of Financial Crime 28-40 DOI: https://doi.org/10.1108/13590790910924948
Institute of Directors South Africa 2016 King IV Report on Corporate Governance for South Africa (IoDSA Johannesburg 2016)
Kanu AM "The Effect of Corruption on Small and Medium Enterprises: Perspectives from a Developing Country" 2015 International Journal of Small Business and Entrepreneurship Research 12-27
Kasipo M "Governing White-Collar Financial Crime in South Africa: The Challenges of a State-Centric Approach" 2016 AMLJA 5-14
Kawadza H "The Liability Regime for Insider dealing Violations in South Africa: Where We Have Been, Where We Are" 2015 SA Merc LJ 383-400
Kennedy DB "Applications of Forensic Sociology and Criminology to Civil Litigation" 2013 Journal of Applied Social Science 233-247 DOI: https://doi.org/10.1177/1936724413477752
Lekubu BK "Improving the Effectiveness of the South African Anti-Corruption Agencies and Strategies: Lessons from Botswana, Hong Kong and Singapore" 2019 Acta Criminologica: African Journal of Criminology and Victimology 47-90
Magobotiti CD "An Assessment of Sentencing Approaches to Persons Convicted of White-Collar Financial Crime in South Africa" 2021 TRW 102-119 DOI: https://doi.org/10.18820/24150517/JJS46.i2.5
Marais P et al "Addressing the Corruption Challenge" 2020 Without Prejudice 28-30
Ocansey EOND "Forensic Accounting and the Combating of Economic and Financial Crimes in Ghana" 2017 European Scientific Journal 379-393 DOI: https://doi.org/10.19044/esj.2017.v13n31p379
Ogbuagu U, Ubi P and Effiom L "Corruption and Infrastructural Decay: Perceptible Evidence from Nigeria" 2014 Journal of Economics and Sustainable Development 20-27
Saddiq SA and Abu Bakar AS "Impact of Economic and Financial Crimes on Economic Growth in Emerging and Developing Countries: A Systematic Review" 2019 Journal of Financial Crime 910-920 DOI: https://doi.org/10.1108/JFC-10-2018-0112
Simpson SS and Koper CS "Deterring Corporate Crime" 1992 Criminology 347-376 DOI: https://doi.org/10.1111/j.1745-9125.1992.tb01108.x
Toner GA "New Ways of Thinking about Old Crimes: Prosecuting Corruption and Organized Criminal Groups Engaged in Labor-Management Racketeering" 2009 Journal of Financial Crime 41-59 DOI: https://doi.org/10.1108/13590790910924957
Van der Linde KE "The Steinhoff Corporate Scandal and the Protection of Investors Who Purchased Shares on the Secondary Market" 2022 PELJ 1-23 DOI: https://doi.org/10.17159/1727-3781/2022/v25i0a14876
Watney M "Highlighting Flaws in the Prevention and Combating of Corrupt Activities Act 112 of 2004" 2019 TSAR 749-756
Yoh LW "The United Kingdom's Deferred Prosecution Agreement Regime Five Years On: Is It an Effective Tool in Addressing Economic Crime Perpetrated by Companies?" 2019 SCLR 137-150
Case law
Glenister v President of the Republic of South Africa 2009 1 SA 287 (CC)
Glenister v President of the Republic of South Africa 2011 3 SA 347 (CC)
Helen Suzman Foundation v President of the Republic of South Africa; Glenister v President of the Republic of South Africa 2015 1 BCLR 1 (CC)
Legislation
Banks Act 94 of 1990 DOI: https://doi.org/10.1093/ajcp/94.4.445
Collective Investment Schemes Control Act 45 of 2002
Companies Act 71 of 2008
Constitution of the Republic of South Africa, 1996
Co-operative Banks Act 40 of 2007
Credit Rating Services Act 24 of 2012
Criminal Law Amendment Act 105 of 1997
Criminal Procedure Act 51 of 1977
Cybercrimes Act 19 of 2020
Financial Advisory and Intermediary Services Act 37 of 2002
Financial Institutions (Protection of Funds) Act 28 of 2001
Financial Intelligence Center Act 38 of 2001
Financial Markets Act 19 of 2012
Financial Sector Regulation Act 9 of 2017
Financial Supervision of the Road Accident Fund Act 8 of 1993
Financial Services Board Act 97 of 1990
Friendly Societies Act 25 of 1956
Long-term Insurance Act 52 of 1998
Magistrates' Courts Act 32 of 1944
Local Government: Municipal Finance Management Act 56 of 2003
Mutual Banks Act 124 of 1993
National Credit Act 34 of 2005
National Prosecuting Authority Act 32 of 1998
National Prosecuting Authority Amendment Act 56 of 2008
Pension Funds Act 24 of 1956
Prevention and Combatting of Corrupt Activities Act 12 of 2004
Prevention of Organised Crime Act 121 of 1998
Protected Disclosures Act 26 of 2000 DOI: https://doi.org/10.2469/cp.v2000.n3.3018
Protection of Constitutional Democracy against Terrorist and Related Activities Act 33 of 2004
Short-term Insurance Act 53 of 1998
South African Police Service Act 68 of 1995
South African Police Service Amendment Act 57 of 2008
South African Police Service Amendment Act 10 of 2012
South African Reserve Bank Act 90 of 1989
Special Investigating Units and Special Tribunals Act 74 of 1996
Superior Courts Act 10 of 2013
Tax Administration Act 28 of 2011
Government publications
GN R217 in GG 37477 of 27 March 2014
GN R853 in GG 41060 of 22 August 2017
GN R169 in GG 41549 of 29 March 2018
Internet sources
Anon date unknown Report of the Judicial Commission of Inquiry into Allegations of Impropriety at the Public Investment Corporation https://www.justice.gov.za/commissions/pic/docs/PIC-Commission-Report.pdf accessed 16 August 2023
Bloomberg 2023 South African Won't Get Off the Grey List by 2025: New FirstRand CEO https://businesstech.co.za/news/business-opinion/723418/
south-africa-wont-get-off-the-grey-list-by-2025-new-firstrand-ceo/ accessed 9 October 2023
Cronje J 2023 SA Ponzi Scheme MTI Ordered to Pay R32bn to Thousands of US Victims https://www.news24.com/fin24/companies/sa-ponzi-scheme-mti-ordered-to-pay-r32bn-to-thousands-of-us-victims-20230915 accessed 21 September 2023
Ensor L 2023 Big Fish in NPA Net, Says Batohi https://bd.pressreader.com/article/281599540154889 accessed 23 October 2023
Ensor L 2023 Greylisted SA is Making Progress https://bd.pressreader.com/article/281569475486615 accessed 30 November 2023
Fischer-French M 2023 Ponzi Scheme Involving More than R3 Billion Bankrupts Entire Families, Affects Over 2000 People https://www.news24.com/citypress/business/ponzi-scheme-involving-more-than-2-000-clients-and-more-than-r3-billion-shakes-northern-suburbs-20231029 accessed 31 October 2023
Global Initiative Against Transnational Organised Crime 2022 Solving SA's White-Collar Financial Crime Puzzle https://www.businesslive.co.za/fm/features/2022-09-21-solving-sas-white-collar-crime-puzzle/ accessed 17 August 2023
Gumede M 2022 Former Tongaat Execs' R3.5bn Fraud and Racketeering Case Moves to High Court https://www.businesslive.co.za/bd/
companies/2022-07-25-former-tongaat-executives-r35bn-fraud-case-moves-to-high-court/ accessed 18 August 2023
Hoffman P 2012 Hawks in SAPS are Neither Effective nor Sufficiently Independent https://accountabilitynow.orga.za/hawks-saps-neither-effective-sufficiently-independent/ accessed 1 September 2023
Interpol 2023 https://www.interpol.int/en/Crimes/Financial-crime/Our-role-in-fighting-financial-crime
Interpol 2023 Our Role in Fighting Financial Crime https://www.interpol.int/en/Crimes/Financial-crime/Our-role-in-fighting-financial-crime accessed 23 June 2023
Investec 2023 South Africa Greylisted: What Does It Mean for You? https://www.investec.com/en_za/focus/economy/its-official-south-africa-greylisted-.html accessed 26 August 2023
Institute for Security Studies 2023 The Problem with South African Criminal Justice Performance Indicators https://issafrica.org/iss-today/the-problem-with-south-african-criminal-justice-performance-indicators accessed 27 August 2023
Jika T 2023 Budget Cut Shock for NPA's Crime Fight https://times-e-editions.pressreader.com/article/281535115725086 accessed 20 November 2023
Khampepe S 2006 Khampepe Commission of Inquiry into the Mandate and Location of the Directorate of Special Operations Final Report https://www.gov.za/sites/default/files/gcis_document/201409/khampeperptfinal-feb060.pdf accessed 20 August 2023
Levine L 2012 Economic Growth and the Unemployment Rate https://ecommons.cornell.edu/server/api/core/bitstreams/6ccf8e57-3a57-4813-ae16-8c6b59217aaa/content accessed 30 January 2024
Maleke D 2023 EOH Rights Its Troubled House after Corruption Blow for Irregular Dealings with the Department of Water and Sanitation https://www.iol.co.za/business-report/companies/eoh-rights-its-troubled-house-after-corruption-blow-for-irregular-dealings-with-the-department-of-water-and-sanitation-088ff223-3d9b-4c65-bb42-c2355fddfe4c accessed 18 August 2023
Masweneng K 2023 Illicit Trade Out of Control in SA https://times-e-editions.pressreader.com/article/282226605445166 accessed 13 November 2023
Mathe T 2021 SAPS' Misplaced Financial Priorities Inhibit It from Tackling Commercial Crimes https://mg.co.za/business/2021-03-19-saps-misplaced-financial-priorities-inhibit-it-from-tackling-commercial-crimes/ accessed 7 September 2023
Maqhina M 2023 Whistle-Blowers to Be Given Incentives https://themercury.pressreader.com/article/281625310056585 accessed 28 November 2023
Mkentane L 2023 Investigating Directorate Blames Lack of Skills for Its Court Defeats https://www.businesslive.co.za/bd/national/2023-11-22-investigating-directorate-blames-lack-of-skills-for-its-court-defeats/ accessed 23 November 2023
Moosa T 2023 Proposed Anti-Graft Body 'Will Lack Independence' https://bd.pressreader.com/article/281608130119083 accessed 26 October 2023
Mutau T 2018 VBS Mutual Bank, the Great Bank Heist, Investigator's Report to Prudential Authority https://www.corruptionwatch.org.za/wp-content/uploads/2018/10/VBS-Mutual-Bank-The-Great-Bank-Heist.pdf accessed 18 August 2023
National Treasury 2011 http://www.treasury.gov.za/twinpeaks/20131211%20%20Item%202%20A%20safer%20financial%20sector%20to%20serve%20South%20Africa%20better.pdf
National Treasury 2023 https://www.treasury.gov.za/comm_media/press/2023/2023022501%20FATF%20Grey%20Listing%20Fact%20Sheet.pdf
Department of National Treasury (RSA) 2023 Fact Sheet. What Does FATF Greylisting Mean for a Country? https://www.treasury.gov.za/comm_media/press/2023/2023022501%20FATF%20Grey%20Listing%20Fact%20Sheet.pdf accessed 26 August 2023
National Prosecuting Authority date unknown Asset Forfeiture Unit https://www.npa.gov.za/asset-forfeiture-unit accessed 21 August 2023
National Prosecuting Authority date unknown Investigating Directorate https://www.npa.gov.za/investigating-directorate accessed 21 August 2023
National Prosecuting Authority date unknown Specialised Commercial Crime Unit https://www.npa.gov.za/specialised-commercial-crime-unit accessed 20 August 2023
National Prosecuting Authority date unknown Annual Report 2022-2023 https://www.npa.gov.za/sites/default/files/uploads/NPA%20Annual%20Report%202022-23.pdf accessed 30 August 2023
National Planning Commission date unknown National Development Plan 2030: Our Future – Make It Work https://www.gov.za/sites/default/files/gcis_document/201409/ndp-2030-our-future-make-it-workr.pdf accessed 27 August 2023
Nugent R 2018 Commission of Inquiry into Tax Administration and Governance by SARS https://www.thepresidency.gov.za/sites/default/files/SARS%20Commission%20Final%20Report.pdf accessed 16 August 2023
Priceweaterhousecoopers 2020 Economic Crime – When the Boardroom Becomes the Battlefield: PWC's Global Economic Crime and Fraud Survey 7th South African Edition https://www.pwc.co.zaC/en/assets/pdf/global-economic-crime-survey-2020.pdf accessed 17 August 2023
Rajendaran D 2012 Approaches to Financial Regulation and the Case of South Africa 2012 http://www.ifmr.co.in/blog/2012/03/06/approaches-to-financial-regulation-and-the-case-of-south-africa/ accessed 7 June 2023
Rondganger L 2023 New Global Organised Crime Index reveals how the Mafia has taken over South Africa https://www.iol.co.za/news/crime-and-courts/new-global-organised-crime-index-reveals-how-the-mafia-has-taken-over-south-africa-d93ed5a1-790f-4f25-8e5a-720735ea6449 accessed 27 September 2023
South African Law Commission 2002 Out of Court Settlements in Criminal Cases https://www.justice.gov.za/salrc/reports/r_prj73_intrep6_2002aug.pdf accessed 1 September 2023
Sewsunker A 2023 Detective Shortage in SA https://www.citizen.co.za/witness/news/detective-shortage-in-sa/ accessed 23 October 2023
Singh S 2023 Detective Shortage Now at More Than 8 000 https://thestar.pressreader.com/article/281479281137225 accessed 13 November 2023
SIU date unknown https://www.siu.org.za
Special Investigating Unit date unknown Special Investigating Unit https://www.siu.org.za accessed 21 August 2023
United Nations date unknown Sustainable Development Goals https://www.un.org/sustainabledevelopment/sustainable-development-goals/ accessed 14 September 2023
Zondo RMM date unknown Judicial Commission of Inquiry into State Capture Report: Part VI Volume 4: All the Recommendations https://www.statecapture.org.za/site/files/announcements/672/OCR_version_-_State_Capture_Commission_Report_Part_VI_Vol_IV_-_Recommendations.pdf accessed 16 August 2023
Published
How to Cite
Issue
Section
License
Copyright (c) 2024 Gerda van Niekerk, Frikkie Ponelis
This work is licensed under a Creative Commons Attribution 4.0 International License.
.png){kind=spacer}