As regulators intensify their efforts to get South Africa off the Financial Action Task Force’s grey list by 2025, the Global Organized Crime Index 2023 has found that financial crime is the most pervasive illicit economy in the world.
For South Africa to be removed from the grey list, it must follow an action plan issued by the FATF. Central to this plan is a demonstrable and sustained increase in the number of investigations and prosecutions related to intricate and serious cases of money laundering.
The findings of the recently released index show how intricate – and widespread – financial crimes are.
Now in its second edition, the first index was launched in 2021 by the Global Initiative Against Transnational Organized Crime (GI-TOC), to assess levels of organised crime in the 193 member states of the United Nations. The GI-TOC’s intention is to update the index every two years.
The 2023 index is based on three key elements:
- the scope, scale, and impact of 15 criminal markets;
- the structure and influence of five criminal actor types; and
- the existence and capacity of countries to be resilient to organised crime.
All countries in the index are assigned a criminality score, comprising the two sub-components of criminal markets and actors, and a resilience score. These components are measured on a scale of 1 to 10, with 1 the lowest level and 10 the highest.
The 15 criminal markets studied include:
- human trafficking;
- human smuggling;
- extortion and protection racketeering;
- arms trafficking;
- the trade in counterfeit goods;
- the illicit trade in excisable goods;
- flora crimes;
- fauna crimes;
- non-renewable resource crimes;
- the heroin trade;
- the cocaine trade;
- the cannabis trade;
- the trade in synthetic drugs;
- cyber-dependent crime; and
- financial crimes.
‘Significant expansion’ of financial crimes
Of these markets, financial crimes were found to be the most pervasive globally (at 5.98). They also ranked among the three most pervasive criminal markets in every continent except the Americas (where it is one of the five most prominent).
After financial crimes and human trafficking (5.82), the cannabis trade (5.34) and arms trafficking (5.21) were identified as the third and fourth most prevalent markets globally. In Africa, financial crime was assessed as the second most pervasive (5.95), with human trafficking (6.06) continuing to be the most pervasive criminal market on the continent.
Enabled by the internet and society’s growing online presence, financial crimes were targeted at victims across the spectrum of the social and economic order, from large corporations to individuals, the index stated.
“The available data and expert opinion, including input on the results of the 2021 index, suggests that financial crimes have indeed expanded significantly over a short period of time.”
Private sector a ‘key facilitator’
Analysing the structure and influence of five criminal actor types – mafia-style groups, criminal networks, state-embedded actors, foreign actors, and private sector actors – the index found that state-embedded actors continue to dominate the criminal landscape as the primary conduit for organised crime worldwide, with an average score of 5.95.
Criminal networks (5.66) remain the second most influential actor, and foreign actors rank third (5.54). Mafia-style (4.02) groups were again found to be the least pervasive globally, outranked in a global comparison by private sector actors (4.76).
According to the index’s authors, the score for the private sector actors reflected “the degree to which private entities collaborate or co-operate with other criminal actors, giving their criminal counterparts access to legal economies”.
It said the private sector has become a key facilitator of and participant in organised crime, “bridging the licit and illicit economies”.
The index found that private sector involvement in organised crime ranged from facilitating the laundering of unlawfully obtained revenue to participating in criminal activities through collusion.
‘South Africa is an outlier’
According to the index’s findings, 83% of the global population lives in countries with high levels of criminality – up from 79% in 2021.
With a score of 7.18, South Africa has the seventh-highest criminality score in the world.
First, second, and third are Myanmar (8.15), Columbia (7.75), and Mexico (7.57), in that order.
In Africa, South Africa comes in third after Nigeria (7.28) and the Democratic Republic of Congo (7.35).
However, in terms of resilience (5.63), South Africa also scores the highest in Southern Africa, making it one of only 12 countries in the high criminality-high resilience category quadrant. The other countries in this quadrant are China, Colombia, Costa Rica, France, Italy, Malaysia, Nigeria, Senegal, Spain, the United Kingdom, and the United States.
The other three quadrants are low criminality-high resilience, low criminality-low resilience, and high criminality-low resilience.
The index defines resilience as “the ability to withstand and disrupt organised criminal activities as a whole through political, economic, legal and social measures”. It is measured by 12 indicators:
- political leadership and governance;
- government transparency and accountability;
- international co-operation;
- national policies and laws;
- judicial system and detention;
- law enforcement;
- territorial integrity;
- anti-money laundering;
- economic regulatory capacity;
- victim and witness support;
- prevention; and
- non-state actors.
“Driven by the efforts of non-state actors to resist organised crime, robust national policies and laws, and strong economic regulatory capacity,” resilience to the impact of organised crime in South Africa is also high, the index found.
But it went on to say that these resilience building blocks had come under strain in 2022, which saw overall resilience fall.
“South Africa boasts a number of pervasive criminal markets, heightened by the influence of criminal actors, especially state-embedded actors – responsible for years of state capture – and criminal networks that are highly interconnected.”
The two economic-focused resilience indicators, anti-money laundering (4.71) and economic regulatory capacity (4.67), scored just below the global resilience average (4.81).
Commenting on the omnipresence of the financial crimes market, the authors of the index said a well-regulated economic sector serves to support legal economic development and impede organised crime’s access to legitimate markets.
“It is critical that efforts to improve economic-focused resilience are stepped up globally,” they said.
