Zwane vows to crack down on illicit financial flows

Cape Town - A forensic probe relating to illicit financial flows from South Africa could be on the cards for 2017, according Mineral Resources Minister Mosebenzi Zwane.

This follows consistent reports from credible sources regarding illicit financial flows out of South Africa, he said in a statement on Wednesday.

"This matter will receive priority attention early in the new year, and if it warrants a forensic investigation, this will be done, so that we can take decisive corrective action," Zwane said.

He noted that, if the reports were true, then South Africa's economic sovereignty is being undermined through the mining of mineral resources which are then illegally exported.

Illicit financial flows, described by the World Bank, is generally the cross-border movement of capital associated with illegal activity or more explicitly, money that is illegally earned, transferred or used that crosses borders.

Over the weekend, Fin24's sister publication, City Press shed light on what appears to be R272bn in unexplained illicit financial flows out of South Africa, identified as most likely related to Ghanaian gold.

Meanwhile, media reports are also turning the focus on a mining deal involving the controversial Gupta family. It relates to the transfer of R1.5bn from a trust account meant for the rehabilitation of Optimum Coal Mine to India's Bank of Baroda.

The department of mineral resources approved this transfer, but information about it was withheld, Finance Minister Pravin Gordhan revealed in October in an an affidavit.

Optimum's dealing with the Bank of Baroda were also highlighted in former public protector Thuli Madonsela's report on state capture that was released in November.

Illicit financial flows typically arise from corruption, illegal exploitation and tax evasion, according to Sean Gossel, senior lecturer at the University of Cape Town, in an article published on The Conversation.

Last month SA Revenue Service (Sars) commissioner Tom Moyane expressed concern about illicit money flows to and from Africa.

It is estimated that globally illicit money transfer schemes cause a total loss of about $240bn annually, Moyane said at the opening of the International Association of Financial Executives Institutes (IAFEI) World Congress.

"Illicit money that leaves Africa reduces money available to Africa to create jobs and develop economies. The same goes for illicit flows between African countries, which could include illegal trading in diamonds or under-pricing of mineral resources for instance," said Moyane.

The National Treasury said in July that the danger of illicit flows and money laundering is not new to South Africa.

"It was in fact identified as a priority integral to a tranche of laws which were passed by Parliament almost immediately after the birth of our democracy and was seen as critical," the department stated at the time.

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