Normal Companies (not accountable and reporting institutions) obligations in terms of SA Anti-Money Laundering Act

Money laundering is concealing or disguising the source, location and nature of the proceeds of a crime. The “proceeds of crime” include any asset (whether in cash or otherwise) obtained by any criminal activity including theft, abduction, robbery, fraud, extortion, drug dealing and tax evasion.

Criminals launder “dirty” money and avoid prosecution and conviction by disguising the true origin and

ownership of the proceeds of their illegal activities.

The prevention of Organized Crime Act (POCA) applies to every person in South Africa.  This act aims to work against organized crime and gang activities with a focus on money laundering, racketeering and any other illegal business activity.

A person is guilty of a money laundering offence if they know that they have acquired property or proceeds from any illegal activity. They may also be found guilty in the following situations:

• They try and disguise the source location or nature of such property. It is an offence to use or own property which has been stolen or gained through illegal activities.
• If they help anyone who is guilty of a money laundering crime.
• They enter into an agreement with someone linked to ill gotten gains.
• They help another person to benefit from unlawful activities.

Other methods that companies may use for money laundering include the following:

• Breaking up deposits into smaller, less suspicious amounts also known as smurfing.  The money is deposited into different bank accounts over a period of time.
• Banking money in offshore accounts in countries with secrecy laws such as the Bahamas, Panama or the Cayman Islands.
• Some countries in Asia operate trust-based banking systems with no paper trail. India and China also have some similar untraceable systems.
• The use of shell or shelf companies which have no assets and do not perform any functions. Fake invoices are generated and the launderer deposits the dirty money into its accounts. The “clean “money can then be withdrawn.

Any suspicions of any of these types of activities must be reported timeously to the authorities and anyone who fails to do so may be found guilty, fined or even imprisoned.

All companies should operate legitimately and lawfully and there are laws that must be complied with. The Companies Act 2008 requires all companies to keep accurate and complete accounting records, which must be kept at the company’s registered office. These records also need to be accessible. Financial statements must comply with financial reporting standards. All companies are required by law to lodge their annual returns every year to CIPC (Companies and Intellectual Properties Commission). This annual return is a statutory return in terms of the Companies and Close Corporations Acts and must therefore be complied with.

Copyright 2017 – Tuffias Sandberg