R400m recovered so far from illicit financial flows


A delegation of government's illicit financial flows Inter-Agency Working Group told Parliament's Standing Committee on Finance that, while it was dealing with cases involving billions in illicit financial flows, it has managed to conclude two cases and recover R400 million in illicit financial flows.

The Inter-Agency Working Group includes the South African Police Service, the Hawks, the South African Revenue Service, the Financial Sector Conduct Authority, the Financial Intelligence Centre, the Special Investigating Unit, the National Prosecuting Authority and the South African Reserve Bank.

The World Bank defines illicit financial flows as "money illegally earned, transferred, or used that crosses borders". SARS has managed to recover R2.6 billion through its illicit economy unit, which deals with more than just illicit financial flows.

At the beginning of the meeting, Standing Committee on Finance chair Joe Maswanganyi said, if illicit financial flows were to be successfully curbed, tax revenue would climb to beyond R2 trillion, whereas it currently stands at R1.9 trillion.

According to SARS commissioner Edward Kieswetter, active investigations involve cases worth tens of billions. 

"Currently, there are 18 projects comprising of 764 active investigations focusing on the illicit economy. To date an estimated prejudice value of the active investigations amounts to R30.8 billion," said Kieswetter.

Kieswetter said, to date, SARS has received 179 requests for information, mainly from the Public Investment Corporation Commission of inquiry, the Zondo Commission of Inquiry into State Capture, the Hawks and the Special Investigating Unit.

"The requests involve 1 385 taxpayers with 2 984 linked entities. Twenty-four cases involving around 350 entities are under ongoing SARS investigation or audit. To date, 19 tax criminal charges have been referred to the law enforcement agencies," Kieswetter said. 

Financial Intelligence Centreexecutive manager for monitoring and analysis Mike Masiapato told the committee that the Inter-Agency Working Group managed to recover a combined R400 million from eight illicit financial flow investigations between 2018 and 2019.

FIC director Xolisile Khanyile told the committee that the Inter-Agency Working Group continued to intervene on illicit financial flows of illegally earned or illegally transferred money beyond the financial threshold of R100 million.

"We had eight cases last year and it has now increased to ten, because we have made progress on the previous eight to the point where we had capacity to add two more cases and two cases have already been finalised," said Khanyile.

Khanyile told the committee that 5% of illicit financial monies are the proceeds of corruption, while 35% comes from organised crime such as drug trafficking and the remaining 60% comes from commercial tax evasion.

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