CHAPTER 7: Tracing the proceeds of crime in Southern Africa
Tracing Proceeds of Crime in Southern Africa
Challenges and Milestones
Money Laundering Experiences, A Survey
Edited by Charles Goredema
Monograph No 124, June 2006
Proceeds of economic crime represent criminal income. They manifest themselves as assets, some of which are the object of the crime itself, such as the stolen vehicle or funds. In more complex economic crimes, the asset to be linked to the offence is more likely to be the product of an intervening transaction and is in a fungible form. Tracing the proceeds of crime is premised on the assumption that through transformation, the origin of assets as criminal income can be concealed and they can be easily and speedily moved between places, or across borders. They can be mingled with others and converted into other forms. This makes the task of identifying the original assets difficult for the victim or for any other claimant. Unless they can identify what they have been dispossessed of, or what has otherwise been unlawfully acquired, the victim or claimant cannot enforce their right to benefit from the asset.1
In his book Accounting Guide to Asset Tracing, Dave Melton defines asset tracing in the context of divorce proceedings as “an accounting process that traces an asset from its separate property beginnings through all of its mutations and demonstrates that the resulting asset in existence at the date of divorce is either separate, marital, or a combination of the two”.2 The definition can be adapted for investigative processes into proceeds of crimes, such as fraud, drug trafficking, money laundering and corruption. Tracing proceeds of crime involves identifying assets with or from their criminal origins, through all mutations, if any, to the eventual form and state in which they exist at the time that they are located. During mutation, proceeds mingle with lawfully accrued resources and can diminish or grow in quantity or appreciate in value. Proceeds of crime are commonly conceived by criminal laws as:
Property derived or realised directly or indirectly from a (serious) crime, (the initial criminal proceeds) and includes property resulting from the conversion or transformation of the initial criminal proceeds (secondary criminal proceeds) and income, capital or other economic gains derived from either the initial criminal or the secondary criminal proceeds.(endquote) (Adapted from definitions in the laws of South Africa, England, Zimbabwe and the bill on money laundering in Malawi.)
The right to decide what to do with the retrieved assets or their progeny vests in the victim of the original crime or with the authority empowered to enforce the law.
These general propositions appear to have achieved universal acceptance within and beyond Southern Africa. There are, however, formidable challenges still encountered in locating and retrieving proceeds of crime. This is particularly so where proceeds of organised economic crime are involved or where the proceeds have been moved across borders. State responses to organised crime and transnational movement of proceeds of crime are not always organised or co-ordinated.
Policy makers and law enforcement agencies are aware that tracing the proceeds of crime, whether organised or not, predatory or market based, can be stifled by money laundering techniques. This is at least part of the reason for the ascendancy of anti-money laundering measures up the scale of global priority issues. Since the advent of the United Nations Convention Against Narcotics and Psychotropic Substances (1988), measures to detect and retrieve proceeds of crime have been accorded prominence. The emphasis was repeated for a broader range of crimes in the United Nations Convention Against Transnational Organised Crime (2000). The regional SADC Protocol Against Corruption (2001) adopted this approach for the proceeds of corruption, as did the African Union Convention on Preventing and Combating Corruption and Related Activities (2003) and the United Nations Convention Against Corruption (2003).
The role of confiscation regimes in anti-money laundering mechanisms is also not questionable. At the same time, the attention devoted to effective strategies and laws to trace proceeds of crime in Southern Africa is still inadequate. This chapter discusses some of the key challenges in establishing effective systems. It argues that some of the most persistent challenges are policy related. In the second part, the chapter highlights some of the milestones that have been achieved in the sub-region and elsewhere, with a view to drawing lessons for the evolution of this aspect of combating economic crime
Who has an interest in tracing and retrieving the proceeds of crime?
Criminal income is not homogenous. Its nature, magnitude and perhaps relationship to the economy on which it impacts depend on the nature of the crime from which it is derived. Economic crime analysts draw a functional distinction between predatory crime and market-based (or related) crime. The categorisation is admittedly woven around stereotypes, but it is useful. At its simplest, predatory crime involves:3
the redistribution of existing wealth. The transfers are bilateral, involving victim and perpetratorâ€¦(and) the transfers are involuntary, commonly using force or the threat of force, although deceit may suffice. The victims (individuals, institutions or corporations) are readily identifiable. The losses are also simple to determineâ€”a robbed (or defrauded) person, institution or corporation can point to specific money and property lost.
The victims of predatory crime are not always readily identifiable. This is so for instance, in cases of grand corruption.
Market-based crimes, on the other hand:
involve the production and distribution of new goods and services that happen to be illegal by their very nature. The exchanges are multilateral, much like legitimate market transactions, involving (among others) producers, distributors, retailers and money managers on the supply side and final consumers on the demand side. Because the transfers are voluntary, it is often difficult to define a victim, unless it is some abstract construct like ‘society’. Therefore there are no definable losses to any individual from the act itself (although there may be from indirect consequences of the actâ€¦).4
Against that background, it is necessary to determine who has an interest in detecting and recovering the proceeds of crime. On that determination may depend the subsequent processes pursued, the difficulties that may arise, and the prospects of success.
In predatory crime, the victims of the crime will typically be anxious to get compensation. Their interest may be shared, or pursued on their behalf, by prosecutors, forensic investigators, accountants, anti-corruption agencies, anti-money laundering investigators and the courts.
For market-based crimes, the absence of direct victims means that the keenest interest to uncover connections between crime and its proceeds is harboured by the agency mandated to representÂ the public, or the state, or even ‘society’ or a section of society. There may be a multiplicity of institutions with this role, or that perceive themselves as having it. They typically include police departments, taxation authorities, asset forfeiture agencies, intelligence agencies and banks. Such ‘victims’ may be classified as representative victims. Whether they can effectively act to recover the proceeds ultimately depends on their capacityâ€”which in turn is centred on the extent to which their role is recognised and supported by law. While it cannot eliminate all of the hurdles, the backing of the law can ease the processes involved in finding proceeds of crime, regardless of whether the victims are actual or representative victims.
What are the challenges to retrieval of the proceeds of crime?
It is difficult to identify issues that are solely peculiar to the tracing and retrieval of the proceeds of crime and do not arise in relation to other aspects of economic crime. Whether the crime is predatory or market-based, the proceeds are likely to have been concealed from public view, either physically or by tampering with documentation constituting the paper trail. Money laundering is intended to conceal the proceeds of crime by various methods. Conventional measures to combat money laundering identify the most common methods and the entities and institutions used. As these measures expand in scope and coverage, so apparently do the innovative concealment mechanisms. Responses to money laundering still lag behind typologies of money laundering.
It is conceded that one of the reasons for the adoption of a new asset confiscation regime in the Proceeds of Crime Act (2002) in England and Wales was the low level of recovery of proceeds of crime. Levi (2003) has attributed this deficiency to several factors, all related to capacity. They are just as relevant to Southern Africa. He asserts that failure was due to:5
moderate investigative knowledge, due to the inherent secrecy of the activities and inadequate resource allocation to financial aspects of crime;
inadequate co-ordination and intelligence exchange between police and the revenue department, due partly to legislative prohibitions on data sharing but also reflecting differences in cultural and policy objectives;
inadequate use made of suspicious transaction reports by the police and customs agencies due to a lack of resources and the inherent difficulty of following up many reports without contacting the accountholder for an explanation;
inadequate powers to detain cash of unexplained origin other than drugs money at bordersâ€¦
The highlighted shortcomings pertain to law enforcement agencies or representative victims. It appears that, with the exception of well-resourced victims, they would be even more glaring in respect of personal victims. No legal system in Southern Africa entitles a non-state victim or investigator to invoke the investigative authority of public law enforcement structures, or to compel the co-operation of private repositories of information.
The propensity of proceeds of crime to be transferred across borders is well known. This tends to occur in the case of illegal income derived from an economy with a weak currency and is even more likely if the income can be converted to a stronger currency acceptable in the destination country.Â Manifestations of this theory abound, but none could be more graphic than the asset constellation attributed to the resource plunder by Mobutu Sese Seko in Zaire. Russell notes that:6
His property constellation included a vineyard in Portugal, a thirty-two room mansion in Switzerland, a castle in Spain and a magnificent first floor apartment in Paris close to the Arc de Triomphe and within easy walking distance of the furrier who made his leopard-skin hats. The piece de resistance was his marble palace in his home village, Gbadolite.
The routes of transfer between countries and regions are, however, not so well established as to be known outside the inner circles of security and crime intelligence. Even less well-known are the precise ways by which such income is infiltrated into the country of destination. Observations in Southern Africa show that the mode of infiltration depends on the peculiar characteristics of the environment in that country. Structural weaknesses can be attractive to proceeds of crime. Features that seem to have a visible impact are:
poor or non-existent public record keeping;
the size and function of the informal economy;
the capacity for pro-active regulation and re-active law enforcement; and
political authorities’ perceptions about money laundering.
These features affect the risk of detection of illegal income on its entry into the socio-economic environment. This is technically described in money laundering as placement of illegal income (but which could also be integration of illegal income with legitimate income), or as it mutates, a stage referred to in money laundering as layering. A country with no conscious anti-money laundering is likely to have an environment inimical to the tracing and recovery of proceeds of crime of foreign origin.
The range of underlying criminal activity from which laundered funds are derived is broad and continually expanding. Illegal income does not have a homogeneous source. It may start off as legitimate income, as is the case with proceeds of tax evasion, or misappropriated funds. There is always potential for ambivalence in the way funds acquired in ‘questionable’ circumstances are perceived by different jurisdictions. In Southern Africa, there is ambivalence about whether transnational fund transmissions should be regulated.7 Currency smuggling, predominantly involving the exchangeable currencies, is prevalent. On account of the vast informal economies in the sub-region, it is not always necessary for funds smuggled out of one country to be deposited into the banking system of the destination country by the smuggler, or anyone else for that matter. They can be used to purchase an asset, which is smuggled to the country from which the funds came. The seller can re-smuggle the purchase price to a third country and invest them in, say, real estate. The frequency with which transactions of this nature occur between South Africa and its neighbours is a matter of speculation, but their occurrence is well known. Once in South Africa, or indeed in any other destination country, proceeds can be invested in securities, which are more difficult to trace and far easier to dispose of than real estate.
Adding to the complexity is the fact that often, proceeds of crime need to be traced ahead of any trial, sometimes as part of the investigation. As such, it is susceptible to frustration by the perpetrator of the underlying crime, using or abusing principles stemming from the presumption of innocence or banking secrecy. This is often the crux of the friction between developing and developed countries arising from proceeds of corruption committed by notorious politicians in the former and transferred to the latter.Â
Among the primary challenges to the recovery of the proceeds of crime is the lack (or in some cases, slow pace) of exchange of crime intelligence among the affected countries. This deficiency pertains to proceeds of activities universally regarded as criminal and activities not so regarded. A major challenge to tracing its movement between countries is that transnational mechanisms to combat crime are passive rather than pro-active. Whether the money will attract the attention of the destination country’s authorities depends more on whether they have been alerted to its presence or approached by the source country than on the destination country’s own detection capabilities.
Appreciation by the victim that an offence has been committed, as well as their determination to obtain compensation for it, are critical factors. There is no mechanism to take up cases on behalf of victims of predatory crime without their initiative and involvement. Crimes are sometimes categorised as ‘victimless’ simply because of victim ignorance. The plunder of the economies in Zaire (under Mobutu), Nigeria (under various military generals) and Zambia (under Chiluba) were committed without the knowledge of the public in those countries. Corrupt political and economic elites enrich themselves without accounting even to the tax authorities.8 The citizens, who are the ultimate victims, often only become aware of the corrupt acts long after their commission, at a time when the proceeds have been moved across many borders.
Recovery of the proceeds of crime inevitably broadens the discussion beyond the sub-region. Even if one were to take no account of globalisation, one would still have to recognise the historical, trade and economic connections between Southern Africa and the developed economies of Western Europe and the United States (US), and the emerging economic giants like China, Brazil and India. The most notorious criminals of Southern Africa, including politicians, have always taken advantage of the bonds bequeathed by colonial history. As Scher puts it, perhaps more than any other sphere of trans-national relations, the repatriation of assets dishonestly acquired in developing source countries and transferred to developed countries is:
fraught with the complicity of the banks involved, the navigation of a costly international legal labyrinth and the fact that those most implicated in public looting usually have the most power and influence.9
While there is no estimate of the scale of proceeds of unlawful activity transferred between the sub-region and western Europe, the anecdotal indicators point towards significant movements. Declarations by applicants for tax and exchange control amnesty in South Africa for funds unlawfully invested outside the country reflected that just over R68 billion was involved, with most of it in western European economies. Virtually all of the proceeds of Mobutu’s corruption that were transferred abroad ended up in western Europe, primarily Belgium and France. In the absence of investigation, no one can assert with certainty that there was complicity on the part of the receiving countries or institutions. One can, however, assume with greater confidence that a substantial part of the externalised proceeds remained out of the sight of national authorities in the source countries on account of banking confidentiality. A combination of such confidentiality and victim country inaction has occasionally been to blame for some of the intractable crime proceeds cases.Â
In a paper presented at the International Bar Association Annual Conference in Prague in 2005, Gully-Hart explored the problems that affect the recovery of proceeds of grand corruption that may have ended up in Switzerland.10
The first challenge emanates from the immunity that is normally vested in heads of state from the processes of criminal and civil law. Examples of kleptocrats who exploited immunity to loot national coffers abound.11 The second is attributable to the failure of the victim state to initiate domestic proceedings, or, having initiated them, to conclude them. Legal assistance proceedings to recover the Mobutu assets commenced in 1997 but remain incomplete to date. Swiss authorities have attributed the lack of progress to absence of movement from the Democratic Republic of the Congo. The same has occurred in respect of assets linked to Jean-Claude Duvalier. Thirdly, the problem could emanate from non-compliance with certain minimum conditions stipulated by the systems of the receiving state, in this case Swiss law. Gully-Hart asserted these conditions to be:
that the victim country had to show that it observes standards of fair trial,
dual criminality, that is to say that activity from which the assets were derived is recognised as a crime in Switzerland and
that the assets in question are probably proceeds of the crime. The victim state carries a responsibility to show the link between proceeds and criminal activity on a balance of probabilities.
At the time of writing, Switzerland had not ratified or acceded to the United Nations Convention Against Transnational Organised Crime. The Convention seeks to do away with the requirement of dual criminality as a pre-condition for mutual co-operation among state parties.
The fourth challenge relates even more directly to the way that the requesting country is perceived by the requested country. If it is perceived to be corrupt and lacking good governance, that can be used as a basis for refusing repatriation. Since the judgment and the basis for it are for the requested country to make, the process is susceptible to subjective considerations.
Finally, repatriation can be stalled by the contradictory claims of third parties that claim to be innocent of the underlying crime. Any survey of the prospects of asset recovery should consider the legal and practical issues that impede or slow down asset repatriation. The challenges emanate from both domestic and foreign realities. In a number of countries, the source of the problem is the manner in which the agencies and institutions at the coalface of crime intelligence gathering are organised. Typically, they comprise the police, security intelligence agencies, customs and taxation departments and anti-corruption agencies. A survey of the sub-region reveals how thin the field is in terms of institutions dedicated to tracking the proceeds of crime. A dedicated Asset Forfeiture Unit was established in the wake of the Prevention of Organised Crime Act (1998) in South Africa, but there do not appear to be similar structures anywhere else in the sub-region.
Each of the various law enforcement agencies gather intelligence and experience of value to asset tracing and retrieval. The scope for synthesis of effort is not always exploited on account of fragmentation and the absence of a framework for co-operation. Sometimes, there are rules against information sharing among the agencies.12 Occasionally, conflicts over operational territory and tactics degenerate into hostile bickering and infighting. South Africa’s Directorate of Special Operations was recently entangled in controversy, stemming from a problematic working relationship with the police service on one hand, and intelligence agencies, on the other.13 The resulting conflict impedes crime detection in general and the pursuit of the proceeds of crime in particular.
In some countries, it is not the only kind of conflict encountered. In designing an effective system to recover proceeds of crime, what appears to be a conceptual conflict emerges between pursuing proceeds as part of enforcing criminal justice or treating it as an instrument of economic policy. Addressing the issue is critical, partly on account of the ethical ramifications of opting for one approach or the other. The connection between illegal assets and the crimes from which they were derived makes it difficult to conceive that their recovery can ever be regulated differently from the determination of guilt or innocence of the alleged criminal.Â This obviously renders the efficiency and effectiveness of the recovery regime dependent on the efficiency of the rest of the criminal justice process. In turn this means that the fewer the number of convictions in economic crime cases, the smaller the level of recoveries.
A system that is mired in economic justice, on the other hand, is more likely to recognise that organised crime and corruption, as well as the myriad other sources of criminal income, cannot be confronted only by the criminal justice system. The process of detecting and recovering criminal income is complementary to, butÂ distinguishable from, the rest of the criminal justice process, especially from the criminal trial. The goals are to bring criminal income into the legitimate mainstream, if it is circulating outside. If criminal income has already penetrated the legitimate economy, the objective becomes to remove it from the possession or control of the suspect beneficiary, even though he/she may never be convicted of any crime. Asset seizure as an instrument of economic justice will easily use amnesties and taxation measures to mop up illicit income. The tax and exchange control amnesty may be regarded as a classic example of a relatively controversy-free process for uncovering proceeds of crime. R64 billion was declared to have been removed unlawfully from South Africa during the latter years of the apartheid system. Some accruals to the fiscus are expected through taxation.
More controversial in the sub-region have been efforts to adopt civil forfeiture, enabling confiscation without conviction, along the lines of the Racketeer Influenced Corrupt Organisations (RICO) Act in the US. While the more draconian dimensions of RICO have not really found favour, some of its features have been adopted, notably in South Africa. The Prevention of Organised Crime Act (1998), commonly called POCA, enables the state to secure the confiscation of assets belonging to a person not convicted of any crime. The state needs to show that the assets are probably proceeds of crime, considering all relevant factors.Â The confiscation process can take place before or after the criminal trial. Civil forfeiture has proved quite useful in the case of fugitives from justice, such as Billy Rautenbach.
It is submitted that it should be conceded that retrieving proceeds of crime can serve other policy objectives. Among them are economic policy aspirations, such as:
drawing illegally acquired funds into the public financial system;
collecting unpaid taxes; and
combating unlawful enrichment and thereby reinforcing the moral lesson that crime does not pay.
This, however, requires dealing with the potential for disharmony between the agencies responsible for enforcing criminal justice and agencies enforcing economic policy concerns. Potential for disharmony and even conflict exists. Compromises may be required from time to time. Accordingly, it is necessary to forge a mechanism by which to determine which objectives to push to the front and whether the sacrifice of the other policy objectives involved is warranted.14 The use of amnesties, which appear to suppress criminal justice objectives, should be understood in this context.
The advent of the United Nations Convention Against Corruption (2003) may make a difference. The Convention became effective in December 2005. It does not directly prescribe civil forfeiture as a method of retrieving proceeds of crime, but it advocates measures that create a conducive environment for civil forfeiture. The Convention stipulates a pro-active system of due diligence, information documenting and suspicious activity reporting, which, if implemented, can make it easier for agencies tasked with civil forfeiture to discharge their obligations.Â
Article 14 sets out a framework for measures against the concealment of proceeds of crime through money laundering techniques. It is complemented by the provisions of Chapter V on asset recovery. Article 51 captures the general thrust of Chapter V, thus:
the return of assets pursuant to this chapter is a fundamental principle of this Convention, and State parties shall afford one another the widest measure of co-operation and assistance in this regard.
Implementation of the Convention will probably depend on effective agencies against corruption. The Convention is discussed further below.Â Â
Anti-corruption agencies: What promise do they offer?
The picture is a little better if the enquiry is broadened to consider institutions dedicated to combating corruption. As an activity predicated to money laundering, it can be argued that an anti-corruption agency should also combat money laundering. In fact, the trend in Southern Africa is to impose the responsibility to detect and investigate money laundering on the same agencies that exist to combat corruption.
Table 1. Dedicated anti-corruption agencies in Southern Africa (2005)
With the exception of South Africa anti-corruption agencies in the region are unitary state structures.15 Unfortunately, serious shortcomings in autonomy and capacity have negatively affected their effectiveness. In some cases, the challenges have resulted in paralysis, as was the case in Swaziland, where the unit has been rendered dysfunctional by court order.16 In other countries, such as Malawi, Mauritius and Tanzania, there are visible measures to strengthen the units. In a context where anti-corruption agencies may have to combat large-scale looting of resources by or with the complicity of the political elite, the lack of autonomy is debilitating. In addition to autonomy, these agencies need to have the support of the judiciary, other law enforcement agencies and the public.
In no Southern African country has that ideal position been attained.
Most countries have not adopted measures to facilitate disclosure of illegally acquired assets, even though some have included provisions that criminalise the holding of unexplained wealth and impose an obligation on holders to prove that any wealth apparently disproportionate to known income is not tainted by corruption or other crime.
The demands on capacity that are introduced by the need to trace assets can be unfamiliar to most crime investigators. Tracing the movement and mutation of the proceeds of crime calls for forensic investigation skills that are not abundantly available in many police agencies in Southern Africa.
Seizing and disposing of the proceeds of crime: The milestones
At the 11th Congress of the United Nations on Crime Prevention and the Rehabilitation of Offenders, it was reported that:17
â€¦since economic crimes, including money-laundering, are committed for the purpose of obtaining profit, tracing, freezing, seizing and confiscating the proceeds of crime are the most effective measures against those criminal activities. The latest sets of measures that the international community agreed to take can be found in the Organized Crime Convention and, more recently, in the United Nations Convention against Corruption, especially its chapter on asset recovery. There is an urgent need to enhance domestic and international efforts to further develop and utilize those measures to the full.
This part of the chapter highlights some of the experiences on which the sub-region can draw in the seizure and disposal of the proceeds of crime. The initial point is that asset tracing, seizure and disposal did not come into being on account of anti-money laundering.
Milestone 1: SADC Protocol Against Corruption (2001)
Article 8 of the Protocol mandates each state party to adopt measures necessary to identify, trace, freeze, seize and eventually confiscate proceeds of corruption. Recognising that the proceeds of crime may be in the custody of financial intermediaries, the Protocol directs state parties to authorise courts and “other competent authorities” to override bank secrecy in pursuing such proceeds.
It is evident that courts in all of Southern Africa can override the confidentiality between a bank and its customers. However, that position seems to have been in existence well before the advent of the Protocol.
The bank customer’s right to confidentiality of information about him is a long recognised right at common law. In many countries, the right is embodied in statutes regulating the conduct of banking business. In fewer countries, the right to privacy is a constitutional right and therefore fundamental. In essence, the relationship between a bank and its customer is based on contract. An implicit term of the contract is that the bank should not disclose to third persons either the state of the customer’s account, or any of his transactions with the bank or any information relating to the customer acquired through the maintenance and administration of the account. Non-disclosure is not absolute and may be infringed if a court so orders, or if disclosure is required for the bank’s own protection, or to prevent fraud or other crime.18 In the words of an eminent jurist:19
.there must be important limitations upon the obligation of the bank not to divulge such informationâ€¦It is plain that there is no privilege from disclosure enforced in the course of legal proceedings. But the bank is entitled to secure itself in respect of liabilities it incurs to the customer or the customer to it, and in respect of liabilities to third parties in (for) transactions it conducts for or with the customer. â€¦the obligation not to disclose information...is subject to the qualification that the bank has the right to disclose such information, when, and to the extent to which it is reasonably necessary for the protection of the bank’s interest, either as against their customer or as against third parties ..or for protecting the bank or persons interested or the public against fraud or crime.
Milestone 2: The United Nations Convention Against Corruption (UN Convention) and the African Union Convention on Preventing and Combating Corruption (AU Convention) of 2003
These two instruments can be considered together as a major development in getting a common position on repatriation of the proceeds of crime. The UN Convention came into force at the end of 2005.20 Article 57 provides a mechanism to repatriate the proceeds of, inter alia, corruption and embezzlement of public funds, to states that can establish legitimate entitlement.
Milestone 3: The Abacha funds recovery
The full extent to which Abacha helped himself to Nigerian public resources (1993–1998) has probably not been quantified. It is estimated to be in the region of US$4 billion. After an extended forensic investigation and asset-tracing endeavour, which was driven by President Obasanjo, about US$600 million has been handed over to Nigeria by Switzerland alone. Abacha had more than 140 banking accounts in that country!
In addition, $200 million has been retrieved from banks in Britain and $300 million from banks in Luxembourg and Liechtenstein, bringing the tally to US$1.1 billion. The recovery does not hold many lessons for legal purists, as the modest success achieved by the Nigerian authorities was attributable to an out-of-court settlement with the Abacha family, from which the latter benefited by retaining US$100 million.
Milestone 4: The successes of the Asset Forfeiture Unit in South Africa
Since its establishment in 1999, the Asset Forfeiture Unit has been visible in pursuing proceeds of organised crime in South Africa. Relying on methods developed in the US, the AFU has scored notable successes against notorious drug dealers, commercial fraudsters, smugglers, armed robbers and motor vehicle thieves. The Unit relies on provisions of the Prevention of Organised Crime Act (1998) that permit the forfeiture of property tainted by criminal activity through civil action. Such action enables the state to confiscate suspected criminals’ assets purely through a civil action against the property without the need to obtain a criminal conviction against its beneficial holders.21
Such of the proceeds of crime as are not passed on to victims are invested in law enforcement, through the Criminal Assets Recovery Fund.
In the Shaik case, the Asset Forfeiture unit relied on a conviction to base the application for confiscation. In many other cases, the unit has taken proceedings which either run parallel to the criminal case or are independent of it. In February 2006, the unit secured a court order to freeze a residential property belonging to a former Nigerian state governor, Diepreye Alamieyeseigha, on the Cape Town waterfront. Alamieyeseigha is charged with 39 counts of money laundering in Nigeria. An application to freeze the rental income from the apartment was pending at the time of writing.
The Asset Forfeiture unit has also recovered property from un-convicted fugitive Willie Rautenbach, the former owner of Wheels of Africa and Hyundai Motor distributors. Its achievements to date are envied across Southern Africa.
In evaluating recent achievements in recovering the proceeds of crime, it would be useful to bear in mind the dichotomies between predatory crime and market-based crime, as well as between proceeds of crime that do not leave the region and proceeds that are transferred abroad. The challenges crystallised in Gully-Hart’s paper pertain mainly to proceeds transferred abroad.
As a general observation, it appears that civil forfeiture is still in limited use in most of the sub-region. Some countries regard civil asset forfeiture with disdain, even suspicion, on account of a historical association with practices that were repugnant. Legislative provisions that permit greater leeway to law enforcement in detecting the proceeds of crime have been adopted in several countries, notably Botswana, South Africa, Swaziland and Tanzania. They do not. however, seem to be utilised regularly. In addition, a large regulatory loophole exists in certain parts of the sub-region, particularly Angola, the DRC, Malawi and Zimbabwe. Penetrability of offshore investment centres in terms of access to information is still a cause for concern.
The framework within which progress in targeting the proceeds of crime should be assessed is sketched below:
Peter Birks, Laundering and tracing, Clarendon Press, United Kingdom, 1995. See also Lionel Smith, The law of tracing, Clarendon Press, United Kingdom, 1997.
Chapter 1 of the book can be accessed at (18 October 2005).
R T Naylor, Wages of crime, Cornell University Press, 2002, pp 252–3.
Michael Levi, Criminal asset stripping in A Edwards and P Gill (eds), Transnational organised crime: Perspectives on global security, pp 212-26.
Alec Russell, Big men, little people: Encounters in Africa, Pan Books, London, 2000, p 18.
The Common Monetary Area pact, which binds South Africa, Swaziland, Lesotho and Namibia, purports to restrict the transmission of cash across member states’ borders to R10,000 per crossing. In reality, there is no enforcement of the prohibition and the limit is frequently violated.
Reference may be made to the exploits of politicians reported in the October 22 issue of the Zimbabwe Independent on illicit dealings with hunting concessions and game lodges on farms acquired under the so-called land reform programme in Zimbabwe.
Daniel Scher, in an article published in the African Security Review, 2005, 14:4, under the title “Asset recovery: Repatriating Africa’s looted billions” 17.
Paul Gully-Hart presented a paper to the Anti-Corruption Working Group entitled “Grand Corruption and the repatriation of looted funds: the position in Switzerland”. The key legal and practical difficulties are outlined on pages 6-7.
Below is a summary of the best-known cases.
In one country, for instance, certain information collected by revenue authorities cannot be disclosed to crime intelligence.
The conflict is receiving publicity as the hearings of the Khampepe Commission progress. See the South African Sunday Times newspaper, 23 October 2005.
In South Africa, a Ministerial Co-ordinating Committee is created in the National Prosecuting Authority Act (1998). The Minister of Justice convenes the committee. Indications are that it has not been functioning as intended.
South Africa has 10 structures engaged in anti-corruption work.
R v Mandla Ablon Dlamini, Criminal Case number 7/2002, which ruled that the statute which established the Anti-Corruption Commission in 1998 was irregularly enacted. In consequence, the Commission had no legal authority. At the time of writing, a bill to establish a replacement has been drafted and is expected to come before parliament in 2005.
Working papers tabled at the workshop on measures to combat economic crime, including money laundering.
See paragraph 240 of Halsbury’s Laws of England (4th edition), vol. 3 (1989); Tournier v National Provincial and Union Bank of England  All ER 550, at 555 and 558; Robertson v Canadian Imperial Bank of Commerce  LRC (Common) 35.
Lord Justice Atkin in Tournier v National Provincial and Union Bank of England, supra, at 560–1.
It is expected to come into effect in December 2005.
See note by Martin SchÃ¶nteich in ISS Crime Index, 2000,Â vol. 4, accessible at .
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