National Treasury deputy director-general Ismail Momoniat says SA is in danger of becoming a mafia state if it doesn’t deal urgently with money laundering and financial crimes.
A report by the intergovernmental Financial Action Task Force (FATF) — the global money laundering and terrorist financing watchdog — has identified glaring weaknesses in SA’s capacity to deal with these activities.
“There are major weaknesses in our system and we have to deal with them as a matter of urgency,” Momoniat says. “Listening to what one hears anecdotally the fear is that we’re in danger of becoming a mafia state.”
SA has been given 18 months to comply with the report’s recommendations and the cabinet has tasked Treasury with the job.
Momoniat says the FATF report is “probably just the tip of the iceberg. Money laundering is clearly rife.”
As a result, SA’s doors are open to those who want to use the country for organised crime and terrorism, he says. “We are very exposed to that. We don’t even know how much so. It seems to me that our intelligence about crime is almost nonexistent.”
Momoniat says the issue is not just a lack of law enforcement and prosecutorial capacity but relevant agencies “deliberately looking the other way” during years of state capture.
There may be new leadership at the National Prosecuting Authority (NPA) and the Hawks but it will take much more than that to establish the capability to deal with these crimes, he says.
“They tend to be sophisticated. You need very good capability to follow the money and understand where it goes and who is involved and so on.”
The banking sector has a system of recording suspicious transactions, “but the question we have to ask is whether the information submitted to the Financial Intelligence Centre [FIC] is being used by our criminal prosecution authorities to the extent that the law allows.”
According to the FATF report the answer is clearly not, he says.
“You don’t have to be a rocket scientist to ask why hasn’t anybody from Steinhoff been charged. Why has no-one been charged with the looting of our state-owned entities?”
The bottom line is that crime really does pay
— Ismail Momoniat, National Treasury deputy director-general
in SA
“The frustration I sit with as an outsider is not just that these crimes do not get solved, but that they seem to take forever to be investigated. I don’t understand why it takes so long.”
That the FIC, NPA and South African Revenue Service are not allowed to discuss what they’re doing or not doing on specific cases with National Treasury doesn’t help.
“That confidentiality shouldn’t be hiding what’s happening criminally. We need to find a better way for such information to come out to the right authorities.”
The FATF report was based on interviews with these authorities, “asking, I guess, hard questions”.
“So they’ve been able to see, for example, that our authorities hardly ever asked authorities in other countries for information. So the Guptas are in the Emirates. When did our agencies ask the Emirates, or India, for information. If they did, why is it taking so long to arrest them?"
Part of the reason was obviously state capture, he concedes.
“And the fact that our authorities don’t seem to share information between themselves is also a problem.”
Treasury is looking at the barriers around confidentiality that prevent a greater exchange of information between relevant authorities, he says.
"That still assumes that there is the will and capability in these agencies to fix whatever problems they have when it comes to cases. Only they know whether they’re succeeding or not succeeding."
"We need a way as a society of getting some sense as to why it takes so long to investigate financial crimes. We can at least push the authorities to discuss cases and give us a report on what the delays are."
The FATF report is complimentary about SA’s big banks, but why did it take them so long to draw the line on the irregular financial activities of the Guptas?
“That’s an answer I would like myself.”
And having been through the evidence to the Zondo commission it still feels it’s "a question one really needs to ask”.
Why hasn’t the National Treasury asked them?
“We have in a general way, and what we get back is that they feel they more than comply with the law but are frustrated with the lack of action when they report suspicious transactions to the FIC and Hawks. They’ve expressed their concern that they don’t seem to follow up.
“The fact of the matter is that it pays to be a criminal in SA,” he says.
If we don’t want to become a mafia state then we have to act now
— Ismail Momoniat, National Treasury deputy director-general
Small criminals may get caught but a big criminal stealing many billions knows how to play the system.
“Just make sure you put aside 10%, donate a certain amount to political parties and have lawyers on tap. They can really tie things up for years and years.
“The bottom line is that crime really does pay in SA.”
He says failure to act on the FATF report would jeopardise banking relationships with financial institutions overseas.
“Few will want to deal with us. If they do take on South African business they want you to pay much more to deal with the risk because we’re then seen as a high-risk country.”
It already is, he admits, and the impact has been felt in many ways including a higher cost of doing business.
“But if we get put on the FATF grey list [for noncompliance with its recommendations] it will be far worse.”
Quite apart from this, “if we don’t want to become a mafia state then we have to act now”.
He says there has been progress since the Zuma administration, but then why does SA still not have risk-adjusted mechanisms in place to detect suspicious money flows?
“Part of the problem is to change the culture that became entrenched under Zuma. You can change the leaders at the top but it’s much harder to change the culture.”
He points to the NPA as an example. “I’ve no doubt that the people at the top are committed to doing what they should be doing, but they’re hampered by the fact that many people complicit with state capture are still there."
SA’s labour legislation makes it hard to get rid of them, “but we need to look at that”.
“We as a country need to hold our institutions and officials to account on their performance, and not just let them get away with vague and general statements."
