1. Cross-Border Financial Flows
Financial Surveillance Department
September 2015

2. The role of the Financial Surveillance Department
Delegated functionary of the Minister of Finance
Responsible for the monitoring of cross-border transactions
to prevent the loss of foreign currency resources
constitute an effective system of control over the inward and outward movement of financial and real assets
avoid interference with the efficient operation of the commercial, industrial and financial system
Powers and functions in terms of the Exchange Control Regulations promulgated under the Currency and Exchanges Act, 1933 (Act No. 9 of 1933)
Supervisory body in terms of the Financial Intelligence Centre Act, 2001 (Act No. 38 of 2001) 2

3. Relevant powers and functions
Requirement that all foreign exchange transactions are reported by Authorised Dealers
Investigation of unauthorised foreign exchange transactions
“Freezing” of bank accounts
Recoupment of capital exported illegally
Forfeiture of funds/assets to the National Revenue Fund
Seizure of unauthorised currency at ports of entry/exit
Wide discretion to impose conditions in respect of cross-border transactions
prior approvals for specific transactions entered into
Prohibit certain transactions
e.g. online gambling 3

4. Illicit financial flows
Illicit financial flows versus capital flight
illicit financial flows involve criminal activity or breach of a statutory duty/law
capital flight not necessarily related to criminal activity
Trade misinvoicing/mispricing
misrepresenting the price or quantity of imports or exports in order to hide or accumulate money in other jurisdictions
motivated by tax evasion, avoiding Customs duties, transfer a kick-back or launder money 4

5. Successes and challenges
Dramatic increase in the detection of IFF, especially relating to trade mispricing
in excess of R100 million blocked over the past nine months
deterred further IFF
several matters referred to other agencies
Challenges
Preservation of audit trail versus removal of red tape
Legal barriers in setting up effective multi-agency task teams and sharing of information
Proactive approach versus reactive approach (need to act immediately when possible IFF or BEPS identified) 5

6. Possible future role of the South African Reserve Bank
Flexibility in our legal framework – can incorporate anti-BEPS and IFF measures
e.g. tax clearance; disclosure of beneficial ownership of legal entities; exchange of information; prohibition of loop structures
consider a general provision in the Regulations that transactions concluded for the purpose/intention of BEPS is void ab initio
As the regulator of cross-border transactions, SARB is well positioned to play a more prominent role in the detection, deterrence and disruption of illicit financial flows 6