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SA is combatting a ‘scourge’ of illicit financial flows

South Africa has signed a number of multilateral agreements to combat illicit financial flows, including information exchange controls to make it more difficult for taxpayers to hide their assets abroad, President Jacob Zuma said in a written reply to Parliament.

Nqabayomzi Kwankwa from the United Democratic Movement (UDM) had asked Zuma what measures South Africa has undertaken to counter illicit financial flows, following a high-level panel report from former president Thabo Mbeki on the matter submitted in 2015.

Mbeki said in his report that illicit financial outflows from South Africa were far outstripping official development aid.

READ MORE: Illicit financial flows costing Africa billions

As much as $70-billion (R965-billion) is estimated to leave Africa annually in illicit financial flows each year.

Zuma said South Africa had taken several measures to combat this “scourge” at both domestic and international levels.

One measure was a new a multilateral agreement called the ‘automatic exchange of financial accounts information’, which allows authorities to exchange information on offshore accounts.

“South Africa is among the first 60 countries that has started the first automatic exchange on September 1 2017 and has already activated bilateral exchange relationships with 48 of the 60 countries,” Zuma said.

Other agreements that South Africa has signed include providing tax administrations with the necessary information to do high-risk assessments, and decide if they should conduct tax audits of specific individuals.

Tax treaties

Zuma said that, to date, South Africa has signed 79 tax treaties, one of which is a multilateral instrument of which 71 countries are signatories. Nigeria, Mauritius and Cameroon have been the latest countries to sign this treaty.

In accordance with the treaty, base erosion and profit shifting measures will be included to reduce opportunities for tax avoidance by multinational companies.

The signing of the Financial Intelligence Centre Act, meanwhile, which aims to develop better risk management relating to prominent individuals and enable institutions to freeze assets if identified by the United Nations Security Council, will also play an important role in combating illicit financial flows.

Zuma signed the legislation into law on April 29, and Finance Minister Malusi Gigaba has since gazetted the act and initiated steps to implement the various provisions associated with the law.

READ MORE: Moleketi – Unit probed illicit trade, tax evasion

Parliament has also conducted extensive hearings on illicit financial flows. Yunus Carrim, chairperson of the standing committee on finance, has convened several joint portfolio committee meetings among the police, finance, trade and industry and mineral resources oversight committees to discuss the matter.

In August Carrim said it had been “suggested to Parliament” that some 5 000 cases of illicit financial flows have been referred to the police, of which a “visible few have been pursued”. – News 24

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