In the previous decade, South Africa has had low levels of prosecution for corruption, money laundering and other white-collar offences. The end of the Jacob Zuma era, the establishment by President Cyril Ramaphosa of a new Investigating Directorate at the National Prosecuting Authority and three recent Presidential Commissions of Enquiry into corruption herald a new era in South African enforcement efforts. Coupled with anticipated changes in South Africa’s key anti-bribery and corruption law, corporates are expected to face increased scrutiny by regulators in 2020 after years of inaction.
- Investigations trends/developments
- Significant law reforms impacting corporate criminal liability
- Internal investigations – key developments
- Sectors targeted by law reforms or enforcement action
- Cross-border co-ordinated enforcement activity
- Financial crime issue predictions for 2020
Bribery and corruption: Shortly after the end of the decade-long Jacob Zuma presidency, South Africa’s new President, Cyril Ramaphosa appointed retired Judge Raymond Zondo to preside over a Presidential Commission of Enquiry into State Capture, corruption and fraud in the South African public sector. Known as the “Zondo Commission”, its focus in 2019 was on “State Capture” – the alleged efforts of the Gupta family, closely connected to former President Jacob Zuma and his son, Duduzane, to influence cabinet appointments and the award of government contracts. The State Capture phenomenon has recently captivated South African national attention and resulted in dramatic concessions by several high-profile professional services global firms, that they benefitted from the phenomenon and were associated with entities owned and controlled by the Gupta family.
Ramaphosa has recently established Presidential Commissions of enquiry into the Public Investment Corporation and the South African tax authority, SARS. In 2019, he also announced the restructure and decentralisation of the National Prosecuting Authority (NPA) to form a new Investigating Directorate within the NPA, headed by Advocate Hermione Cronje. The Investigating Directorate is tasked with investigating serious, complex and high-profile corruption, most notably the subject matter of the Zondo Commission.
Although the NPA has conceded that the Zuma era generally resulted in the evisceration of its prosecutorial talent and capacity, it is anticipated that the new Investigating Directorate will announce various indictments of public and private individuals and companies in 2020.
The number of government officials convicted for corruption or offences related to corruption stands at 210 as at 2019, a figure that is slightly lower than the National Director of Public Prosecution's initial target of 230 officials to be convicted. We expect this number to increase in coming years.
Anti-Money Laundering: The South African Reserve Bank announced on 20 December 2019 that it had fined four banks for anti-money-laundering compliance deficiencies and control weaknesses. This continues a trend over the past five years of the anti-money laundering regulator largely focussing on banks, resulting in the imposition of significant penalties. Money-laundering cases have also been successfully prosecuted with a 100% conviction rate achieved from all 87 cases prosecuted.
The Prevention and Combating of Corrupt Activities Amendment Bill is aimed at amending the Prevention and Combating of Corrupt Activities Act (PRECCA) to provide for:
- the passive corruption of foreign public officials;
- extending the offence of unacceptable conduct towards ordinary witnesses to include whistleblowers and members of the accounting profession;
- criminalising facilitation payments;
- increasing fines payable;
- introducing an immunity provision for whistleblowers complying with reporting obligations;
- an obligation to implement internal compliance programmes; and
- further extraterritorial reach.
The Bill is likely to be enacted in 2020.
The 2019 Financial Intelligence Centre (FIC) guidance on the use of automated transaction monitoring systems requires that a suspicious or unusual transaction must be investigated and reported to the FIC within 15 days after an alert is generated by the ATMS. The directive further requires that all investigations and decisions taken relating to alerts generated by the ATMS must be adequately documented and preserved. Where a reporter is a subsidiary or a branch of a foreign-based organisation which also utilises an ATMS, the domestic reporter must ensure that the ATMS is tailored to comply with domestic money laundering risks within the South African reporting regime.
The Zondo Commission’s focus thus far has been on the IT, accounting and consulting sectors.
The South African Competition Commission, South Africa’s highly active anti-trust regulator, continued its enforcement action against various domestic and global banks arising from alleged currency manipulation. The Competition Commission’s efforts have been co-ordinated with other international regulators, which is a recent trend in anti-trust enforcement action in South Africa.
Until recently, enforcement action for corruption was very low in South Africa. However, the recent investment of significant resources in the NPA and the Investigating Directorate will likely result in increased prosecution activity of corporates. The fallout from the Zondo Commission will continue to be a concern for in-house legal in corporates that conduct business with the South African government.
The slew of revelations has had far-reaching and existential consequences for large multinational corporations in South Africa and indictments of certain of these entities and representatives are expected in 2020. In-house legal would be well advised to review internal compliance programmes, ahead of the anticipated changes to PRECCA.
This article is part of the Cross-border White Collar Crime and Investigations Review. Read our overviews and insights in other jurisdictions here.
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