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  • Writer's pictureGareth Stokes

Horror rape and murder conviction statistics set the scene for SA’s financial crime free-for-all

South Africans are a funny lot. Standing at the entrance of a major retailer over the weekend, your writer watched a stream of shoppers passing up the opportunity to save the Rhino. You know the inconvenience, dear reader, of halting your mad grocery rush to reach into your wallet, etc. Not to mention the data protection concerns of filling out a National Parks donation card.




 

The bitcoin versus Rhino trade-off

If only Jane and Joe Average were so non-committal when it came to making questionable investments. It seems a nudge, wink and promise of some ridiculous monthly return is enough to get the average local to part with massive slices of their lifetime savings or pension. How else would you explain the frequency and severity of multi-billion dollar Ponzi scams? Earlier this year, BHI Trust went belly up, costing individuals around R1.2 billion and resulting in its self-confessed orchestrator being handed a 25-year sentence. And a couple of years back, but still in the press, Mirror Trading International fleeced investors of billions in a crypto-linked racket.

 

The angle for today’s opinion piece crystallised during a day-long Fighting Financial Crime Conference held in Johannesburg recently, hosted by FICA compliance software specialists, DocFox Africa (now called nCino). An early morning presentation offered some interesting comparisons between the funding available for combating financial crime and the proceeds from it. For example, the Directorate of Priority Crimes Investigation (DPCI), also called the Hawks, received just R2.1 billion in funding in 2022-23, which it has to divvy up between its various units.

 

Fraud, financial crimes dwarf Hawks’ budget

Contrast this with the reported R150 million that a professional kidnapping syndicate extorted for the safe return of a member of a wealthy family or the billions stolen from households through the aforementioned white-collar investment scams each year.

 

Chad Thomas, CEO of IRS Forensic Investigations, blamed South Africa’s long-term struggle to get to grips with serious contact crimes for the financial crimes free-for-all we are currently witnessing. “The two most serious and heinous crimes, rape and murder, have got such low conviction rates that the average criminal believes he can get away with anything, he becomes more emboldened, and he starts climbing the rungs of the ladder to participate in more serious crimes,” Thomas said.

 

Quoting shocking statistics of only one in 10 murders resulting in a prosecution, and an even worse outcome in the reporting of rapes and prosecution of rapists, Thomas said local criminals had little reason to fear the consequences of their crimes, let alone being held accountable. If the rape and murder statistics do not leave you cold, dear reader, it gets worse. “South Africa is number one in Africa for kidnapping; we have the highest rates of kidnapping on the entire continent and are ranked number six in the world,” he said.

 

Early gains made in tackling the organised kidnapping syndicates that are targeting high net worth victims are being undone by the sheer number of copycat criminals popping up across the country, from informal settlements to the suburbs.

 

Not for the fainthearted, SA’s Scamoppolus

As the country’s various crime investigating and prosecution units struggle to tackle violent crimes like kidnapping, murder and rape, they have inadvertently created a vacuum in which fraudsters and swindlers thrive.

 

“A lot of the state law enforcement and prosecutorial resources are geared towards fighting and prosecuting violent contact crime; at the same time, the world is facing a fraud tsunami the likes of which has never been seen,” Thomas said, coining the portmanteau ‘Scamoppolus’ to describe the construct. The new word humorously implies a grand scale scam, and illustrates a growing universe of sophisticated and elaborate fraudulent schemes.

 

South Africa is not alone in battling financial crime, with as many as four-in-10 crimes reported in the UK falling into this category while Ireland has seen a near 90% spike in reported financial crimes in its latest reporting period. And around USD10.3 billion in losses were reported to the US FBI Internet Crime Centre in 2022; this voluntary reporting tool being blighted by massive underreporting of this category of crime.

 

The presenter shared report after report illustrating the scale of the global fraud and financial crime scourge, including a report from the Association of Certified Fraud Examiners which noted up to 5% of corporate revenue is currently lost to fraud every single year, totalling USD4.7 trillion globally; and The Kroll Fraud and Financial Crime Report, which estimates that over USD800 billion is laundered every year. Given these horrific, frightening numbers, the big question becomes: what are countries’ crime fighting institutions doing about the problem?

 

View financial crime as a national security threat

According to Thomas, the UK and US have thrown significant resources at the problem, including cash and higher employee headcounts. The UK, for example, added 400 fraud investigators and budgeted another GBP150 million for an enhanced financial crimes unit. More importantly, the UK and US have responded by branding certain types of financial crimes as a national security threat.

 

“The UK declared financial crime a national security threat, which opened up far more resources and funding to investigate and prosecute syndicates; and the US Department of the Treasury released a blueprint for fighting organised crime syndicates operating in the financial crime sector, and [preventing] the laundering of funds by criminal syndicates and terror organisations,” he said.

 

The standout message from this segment of the presentation was for regulators to take a no nonsense approach to communicating with citizens. Thomas suggested that South African crime fighters and financial services regulators copy their peers in the UK by adopting graphic phrases such as ‘pig butchering’ when warning the public about advance fee frauds. The imagery is quite disturbing: it involves wealthy ‘marks’ being identified, and fattened up, so that the con artist can fleece them for the largest sum of money possible.

 

For a clearer definition, ‘pig butchering’ refers to a sophisticated and prolonged type of fraud where scammers ‘fatten up’ their victims before ‘butchering’ them. The technique spans initial contact and grooming; an investment pitch; initial investments and returns; large investments and fraud; and finally, the disappearance of the scammer. “The crude term brings home the reality of financial crime; our victims are literally fattened up, and by that, I mean groomed, before the scammer takes them for absolutely everything,” Thomas said. He bemoaned what he described as inadequate communication between South Africa’s law enforcement agencies and the citizenry.

 

The violent crimes hurdle…

From a South African context, violent crime continues to hog the bulk of available crime-fighting resources, and understandably so. The speaker contrasted a cash-in-transit heist scene, involving a relatively small R20 million rand, with dozens of police personnel in attendance, with a R1.2 billion Ponzi that had a single Hawks constable investigating. How can the crime fighters change course? “It is time to stop fixating on State Capture; the Guptas; and Zuma and concentrate on the current problems,” Thomas concluded. He called on the government to declare all crime, including financial crime, a national security threat and open up funding resources.

 

Your writer could not agree more, drawing from one of the central themes to emerge from the Fighting Financial Crime Conference, being that to identify and take down a criminal or criminal syndicate often required little more than following the money. We need money to follow the money. And we need to do whatever it takes to get South Africa removed from the Financial Action Task Force (FATF) grey list. The suggestions made by the FATF are essential in the ongoing global struggle against money laundering and combating the funding of terrorism.

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