Lynda Loxton
BANKS and other financial institutions could soon be expected to play a more active role in cracking down on money laundering in South Africa.
Although no hard statistics are available about the extent of the problem, Justice Minister Dullah Omar warned delegates at a conference in Cape Town this week that nobody should under-estimate the danger presented by the rapid growth of money laundering.
“It is a danger that should be taken very seriously by all countries,” he said.
“Countries that fail to take action against it face not only massive potential financial losses, but a terrible threat to the entire fabric of society.”
According to a study by the South African Law Commission, money laundering can be defined as “the manipulation of illegally acquired wealth in order to obscure its true source or nature. This is achieved by performing a number of transactions with the proceeds of criminal activities that, if successful, will leave the illegally derived proceeds appearing as the product of legitimate investments or transactions.”
Omar had a simpler and more direct definition. Money laundering, he said, involved “the hiding of money, that is, the salting of illicit income in different banks or real estate investments, and the cleaning of money which involves concealing the source of money in various ways.”
The problem with cracking down on money laundering was that it was done by “invisible” people using the latest high- tech computer programmes.
This resulted in a “cash anonymity” that funded criminal activities with ease, often allowing individuals to set up business in unfair competition with legal activities, avoid tax and generally spend their ill- gotten gains as and when they wanted.
Money laundering is a fairly new phenomenon in South Africa. Omar said now that South Africa was an open society, “the super gangsters have identified [the country] as a fresh and innocent market for money laundering and international crime”.
They were aided in this by the “pervasive and almost obsessive secrecy” built up in South Africa by covert government operations under apartheid, which had spilled over into the private sector.
“Corruption and dishonesty became a daily feature of South African political and economic life,” Omar said.
As a result, many South Africans hid their sources of income and did things “off the book”, sometimes with the aim of transferring their money out of the country.
Money laundering also promoted the growth of a secondary “underground” economy, debilitated the financial sector and perverted business morality, Omar said.
Every effort therefore had to be taken to “collectively combat this scourge”.
He said the South African Law Commission had recommended that financial institutions should be forced to keep effective records on all clients and possible dubious transactions.
It also recommended the establishment of a central financial intelligence unit to keep track of such transactions. Parliament is currently examining legislation to enforce this.
The conference, which is being sponsored by the Commonwealth Secretariat, brings together delegates from various Commonwealth countries for the first in-depth examination of money laundering in Africa.
Commonwealth Secretariat head Dianne Stafford said most of the conference would be held behind closed doors so that delegates could be totally frank about the extent of the problem and the best ways of combating it.
The secretary of the Commonwealth’s financial action task force Patrick Moulette said it was vital that all countries adopted strict regulatory regimes to monitor money laundering and ensure it was eliminated.