Category Fraud/Crime

Manuel urges a crackdown on financial crime

27 February 2007 Gareth Stokes

A mere seven days ago, Trevor Manuel launched an appeal to the various regulatory bodies responsible for the administration of the financial services industry. In his 2007 Budget Speech, he requested that these bodies work with the justices system to root out white collar crime.

"I have instructed the Financial Intelligence Centre, the Financial Services Board and the South African Revenue Service to work collaboratively with the South African Police and prosecutors in dealing with financial crime and its proceeds. I have also asked that fiduciary and trusteeship responsibilities need to receive the highest priority in the oversight activities of our regulators. We must ensure that neither organised crime nor abuse of stewardship obligations should be allowed to violate our hard-earned democracy and the integrity of our country."

Manuel's appeal was probably in response to the massive coverage afforded the Fidentia scandal, but the statement should also be viewed in light of the significant threat posed by financial crime and fraud to our country today.

Scorpions to tackle Fidentia

A week after Manuels appeal it emerges that the first criminal investigations into Fidentia's activities are already underway. Scorpions boss, Leonard McCarthy, revealed on the weekend that: "I can confirm at this time that the Financial Services Board has referred the Fidentia case to my office and that it will be looked into."

Apart from the Financial Services Board and the Scorpions, a number of other government agencies are allegedly investigating Fidentia and its key personnel. These include the National Prosecuting Authority (NPA), the Financial Intelligence Centre, the police and SARS.

For now there are a string of unanswered questions. Will Arthur Brown have his day in court? Will Danisa Baloyi be censured for her conflicting interests in Fidentia and the Living Hands Trust? How many other Fidentia executives will have to answer charges? And exactly how much money is missing?

We will probably have to wait quite some time for the answers to these questions. The wheels of justice turn slowly in such cases as evidenced by the proceedings against the executives at Leisurenet recently.

Another massive R800 million case

Unfortunately the Fidentia scandal is only one of a number of cases of poorly handled investor funds in South Africa at the moment.

Earlier this week, the SABC reported on 23 high level executives up on fraud charges relating to R800 million in missing pension fund money. This money was allegedly siphoned from nine different pension funds.

The executives appeared in the Johannesburg Specialised Commercial Crimes Court on Monday. What is surprising in this case is that the press has hardly provided it any coverage. The amount of money involved is similar to the amount in the Fidentia scandal - yet the media barrage is nowhere to be seen.

Fraud epidemic in social services

White collar crime is rampant at all levels in our society. Manuel acknowledged major problems with fraud in various departments of government.

"Three years ago, the Department of Social Development initiated measures to curb fraud in our social grants system. With the help of the Special Investigating Unit, over 130, 000 people have been removed from the system and about 2,500 charged with fraud so far."

The 2,500 individuals charged so far represent only a fraction of the perpetrators of social grant fraud. The problem has reached epidemic proportions - and it is for this reason that a number of commentators are sceptical about government's plans to establish and run the proposed social security system.

At least our Finance Minister realises the significance of the problem. "Ensuring that we eliminate fraud and corruption from the social grants system is critically important," he says.

Editor's thoughts:
There have been a number of financial scandals in South Africa over the years. It seems that the punishment for white collar crime is doing little to dissuade people from embezzling funds. Do you think that the justice system is doing enough to tackle the problem? Send your answer to .



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