FIC’s 2023/24 annual report: the battle against financial crime

The Financial Intelligence Centre’s 2023/24 annual report unfolds like a gripping Hollywood spy thriller, albeit penned by meticulous accountants.

The annual report elaborates on the FIC’s competence and performance during 2023/24, its advances in ensuring broader compliance with the Financial Intelligence Centre Act (FICA) as well as its contribution in addressing the deficiencies identified by the Financial Action Task Force (FATF) so that South Africa can exit the grey list.

Setting the scene in the report is Minister of Finance Enoch Godongwana, who describes South Africa’s economy as one of the top four economies on the African continent. The International Monetary Fund predicts that South Africa will remain one of the largest economies, together with Egypt, Algeria and Nigeria, and has the potential to reach even greater heights in the foreseeable future.

“This, indeed, is an encouraging view. However, the high level of financial crime over the last few years continues to hamper the country’s ability to eradicate poverty, create employment, reduce inequality, and attract foreign investment. We thus cannot but continue progressing the fight against financial crime,” Godongwana said.

The FIC provides financial intelligence and forensic analysis that enables law enforcement and other competent authorities to conduct their investigations, secure prosecutions, and apply for forfeiture of criminal assets.

In his foreword, Pieter Smit (pictured), acting director and accounting authority at the FIC, attempts to distil the 130-page report that outlines the extensive scope of the FIC’s activities over the past financial year.

According to Smit, it was a year characterised by the focused and urgent implementation of the numerous legislative and regulatory developments that took place in the previous financial year, and the imperative of meeting the FATF’s requirements to help South Africa exit the grey list.

Delving into the numbers, the report shows that the FIC facilitated the recovery of R98.5 million in criminal proceeds during the 2023/24 financial year, and, although the FIC does not carry out investigations directly, it generated a total of 3 924 intelligence reports.

Working together to combat crime

These figures merely hint at the extensive scope of the FIC’s activities. Although a significant part of the Centre’s responsibilities involves the ongoing supervision and enforcement of compliance with FICA and its amendments, it also collaborates closely with various national and international government departments, entities, and agencies to combat money laundering and terrorist financing.

Key collaborators include government institutions such as law enforcement, prosecutorial authorities, the FSCA, the South African Revenue Service, and the South African Reserve Bank. The FIC also works with accountable institutions such as legal practitioners, banks, estate agents, gambling institutions, crypto service providers, and credit providers.

Other partnerships include the Inter-Agency Working Group on Illicit Financial Flows, the South African Anti-Money Laundering Integrated Task Force, and the Fusion Centre for corruption and money laundering matters.

The FIC is also part of the Intergovernmental Fintech Working Group, global anti-money laundering bodies such as the Egmont Group and the FATF, the Eastern and Southern Africa Anti-Money Laundering Group, the BRICS Countering Terrorist Financing sub-working group, and the OECD Foreign Bribery Working Group.

The FIC has strengthened its global and domestic partnerships, signing 102 memoranda of understanding with international financial intelligence units. During the reporting year, new agreements were reached with the intelligence units of Kazakhstan and Pakistan.

Domestically, the FIC maintains 42 memoranda of understanding with key institutions to ensure the safety, stability, and sustainability of the financial system. Additionally, the FIC took a significant step by signing a co-operation agreement with Interpol’s South African branch.

FIC case studies

But name-dropping and impressive numbers aside, to truly understand the FIC’s role in combating financial crime on the local and international fronts, the case studies in the report offer the most compelling insight.

In one kidnapping case, a suspect demanded ransom money after abducting a victim. The FIC’s investigation linked the suspect’s bank account to the crime, allowing authorities to block the proceeds through a section 34 intervention order. Despite the successful financial intervention, the suspect was killed in a shootout with the South African Police Service.

A large drug-trafficking network was uncovered when the Directorate for Priority Crime Investigation (Hawks) flagged vehicles transporting narcotics between provinces. The FIC was brought in to analyse the financial transactions of six individuals and two entities connected to the syndicate. The analysis revealed financial links and drug-related transactions, which led investigators to a narcotics-manufacturing laboratory. The case remains under investigation.

In a fraud case, two bank accounts triggered a suspicious transaction report because of the unusual amounts involved and the erratic management of the accounts. The FIC’s analysis identified multiple individuals potentially linked to illicit financial flows, fraud, or money laundering. The findings were passed on to law enforcement for further investigation.

Illegal wildlife trade also came under scrutiny when the FIC was asked to assist with an investigation into abalone poaching. Six individuals were found to have conducted irregular cryptocurrency transactions and international transfers to known smuggling hubs in China and Singapore. One of the suspects had financial dealings with a notorious syndicate leader involved in a billion-rand perlemoen (abalone) poaching operation. The matter is still under investigation.

In a child pornography case, an international agency alerted the FIC to an IP address in South Africa involved in distributing illegal content. The FIC’s analysis of the company hosting the IP address uncovered multiple payments from unidentified sources, which were then transferred internationally via SWIFT. The legitimacy of these funds could not be verified, and evidence suggested the company’s owner was linked to the illicit activities. This led to a search and seizure warrant being issued under the Criminal Law (Sexual Offences and Related Matters) Amendment Act.

A case of theft involved a politically exposed person (PEP) who diverted millions of rands intended as a refund from the South African government to a foreign government. Instead of being transferred to the appropriate foreign government department, the R49.6m refund was paid into an attorney’s trust account and later transferred into the PEP’s personal bank accounts. A preservation order was obtained for R35m, and four properties valued at R10m were attached as part of the recovery process.

Another case involved illegal gold mining and trading brought to light through the FIC’s involvement in an investigation by the Asset Forfeiture Unit. Six individuals connected to a metals dealership were found to be living far beyond their declared means. Profiling revealed that three of the individuals had fraudulently obtained South African identity documents. The FIC issued directives on nine bank accounts, and two preservation orders were obtained, resulting in the arrest of six individuals. Legal proceedings are ongoing.

And all of this was achieved by a workforce complement of 257 as of 31 March this year.

Going forward, Smit said the FIC would continue to focus on building capacity and resources and contributing to South Africa’s collective effort to exit the FATF grey list.

“At the financial year-end, the FIC was finalising South Africa’s national risk assessment on terrorist financing, the conclusions of which will be published in the next annual report,” he said.

Read the full annual report here.