1. Illicit Financial Flows
March 2017

2. Presentation overview
FinSurv: Regulatory and Enforcement Role
Electronic Systems/Data available to FinSurv
Information sharing
Measures implemented by FinSurv to deal with IFFs
Outcomes of measures
Challenges
Questions 2

3. FinSurv: Regulatory and Enforcement Role
Financial Surveillance Department (FinSurv) regulates and monitors cross-border transactions, prevents the abuse of the financial system and supports prudential regulation of financial institutions
FinSurv is empowered to investigate illicit foreign currency transactions and to institute actions against alleged perpetrators (blocking of funds, attachment of money and/or assets, forfeiture and/or the referral to law enforcement) 3

4. Monitoring Systems/Data available to FinSurv
Reporting System – all cross-border foreign currency transactions are reported electronically to FinSurv by all Authorised Dealers in foreign exchange (ADs) and Authorised Dealers in foreign exchange with limited authority (ADLAs)
Import Verification System – verifies and authenticates SARS Customs data related to imports. Data supplied by SARS Customs
Export system – used by FinSurv to monitor receipt of export proceeds. Data supplied by SARS Customs
Online Risk Manager – used by FinSurv for investigation purposes and enables us to collect and use financial intelligence
gathered during investigations 4

5. Information sharing
FinSurv cross-border transaction data in respect of imports and exports to SARS
FinSurv cross-border transaction data to FIC
Customs data to FinSurv (IVS and Export system)
Requests for information by SARS (66 in 2016/2017)
Requests for information by law enforcement (Criminal Procedure Act)
Referrals and request for information (FinSurv and FIC) (various and both ways) 5

6. Measures implemented by FinSurv to deal with IFFs
Cross-border IFFs is a strategic focus area. To increase ability to detect, deter and disrupt IFFs a number of measures have been implemented:
Enhanced pro-active mining and analysis of cross-border foreign currency transaction data – detection of suspicious activities
Continuous enhancement of financial intelligence using data and information obtained during investigations and from other stakeholders (profiling, identification of high risk categories of transactions, identification of modus operandi followed etc.) 6

7. Measures implemented by FinSurv to deal with IFFs (continued)
Engagement with other departments within the South African Reserve Bank, in particular Bank Supervision Department, through sharing of information and joint inspection at ADs
Engagement including the sharing of information (within the ambit of the law) with other stakeholders including SARS, FIC, law enforcement agencies, National Prosecuting Authority (including the Asset Forfeiture Unit)
Participation in multi-agency task team 7

8. Measures implemented by FinSurv to deal with IFFs (continued)
Awareness campaign involving ADs with the focus on their role to detect and report suspicious foreign currency activities and the risk of non-compliance including the impact on the integrity of the financial system
Development of mechanisms to alert ADs and ADLAs when suspicious activity by specific parties is detected
Enforcement strategy changed to early detection and disruption of activities (focus not only on large amounts but on earlier enforcement action) 8

9. Outcomes of measures
Pro-active mining and analysis of cross-border foreign currency transaction data together with enhancement of financial intelligence resulted in early detection and enforcement action
Dramatic increase in referrals by ADs of transactions where IFFs suspected contributed to early detection and enforcement actions (awareness campaign)
More cases but lower contravention levels
Change in modus operandi of alleged perpetrators detected (counter measures to be implemented) 9

10. Outcomes of measures (continued)
Blocking orders issued 2016/2017: approximately R145 million
(2015/2016 R307 million)
Estimated contravention amounts (under investigation)
2016/2017: R3.2 billion (2015/2016 R14.6 billion)
Estimated IFF’s prevented: R5 billion to R8 billion
Forfeiture Notices published R228 million 2016/2017 (forfeited to State)
Regulation 3 seizures at airports R41 million 2016/2017 (R86 million 2015/2016) Note: Not all seizures are referred to FinSurv
31 cases reported to law enforcement for criminal investigations 2015/2016 (change in strategy)
Successful prosecution of major player in illegal foreign
exchange market 10

11. Challenges
Capacity
Parallel investigations (more than one agency on same case)
Resources and systems to facilitate early detection of IFFs
Co-operation between public and private sector
International co-operation between enforcement agencies/countries
Disclosure of beneficial ownership
Reasons for contraventions have changed – more organised 11

12. Questions 12