31 July 2023: As South Africa’s financial intelligence unit, the Financial Intelligence Centre (FIC) is the only government entity authorised to receive information on transactions and regulatory reports relating to suspicious and unusual transactions.
Financial and non-financial institutions listed in Schedule 1 to the FIC Act, called accountable institutions, are seen as potential targets for criminals looking to launder their money or to finance terrorism. Therefore, accountable institutions’ registration with and regulatory reports to the FIC are central to identifying, disrupting and deterring money laundering and terrorist financing.
The FIC interprets and analyses the regulatory reports filed by accountable institutions to develop financial intelligence which is used by law enforcement, prosecutors and other competent authorities in their investigations and applications for asset forfeiture. The FIC does not itself conduct investigations.
As financial crime is seldom hampered by geographic borders, the FIC has in place information exchange agreements with its counterparts and other role players across the globe.
The connection between institutions’ regulatory reporting, the usefulness of transnational collaboration, and the FIC’s analysis in following the money in the pursuit of financial crime was well illustrated in the article published recently in the Sunday Times: Steyn City ‘tech entrepreneur’ jailed for fraud.
The article described the fraudulent exploits of Nigerian techpreneur, Martins Egenamba, 37, who was sentenced on 2 June 2023, in the Palm Ridge Magistrate’s Court, to 15 years in jail for his role in an international business e-mail compromise (BEC) scheme.
How business e-mail compromise works
Criminals use BEC fraud to divert funds from legitimate transactions. They alter bank details on invoices so that when targeted government departments and entities, non-profit organisations or businesses, pay for services rendered, the payments go instead into the criminals’ accounts.
In the Egenamba matter, the FIC was made aware of a BEC investigation by the US Federal Bureau of Investigation (FBI), that involved two fraudulent SWIFT payments from a JP Morgan Chase bank account held by a US entity, to a South African entity Barlon d’Or Group (which was owned by Egenamba).
A person based in the US was in the process of purchasing a property there when they received what was subsequently ascertained to be a spoof e-mail from someone posing to be his lawyer for the property transaction. The property buyer was instructed to deposit US$675 350.89 into an account provided in the spoof e-mail. All the funds were withdrawn from that account in cash and cashier’s cheques and US$540 000 of this was traced to a JP Morgan Chase bank account, in the name of an entity registered in the US.
Link to SA banking system
From the JP Morgan Chase bank account, a total of US$445 000 was transferred in two transactions, to an account held at FNB, a division of FirstRand Bank Limited, to the benefit of Barlon d’Or.
The FBI alerted the FIC to this and requested assistance in their investigation. The FIC set in motion various tracking and tracing processes on the bank account in South Africa. One of these was that the FIC issued an instruction to the bank, under section 34 of the FIC Act, not to proceed with transactions on the account for a period of 10 days. Section 34 instructions allow time for further enquiries on identified bank accounts, and for the FIC to alert the Asset Forfeiture Unit, the National Director of Public Prosecutions and/or the Special Investigating Unit. Following the section 34 instruction to FNB, the FIC was able to secure more than R6.1 million in the account and the AFU successfully obtained a forfeiture order on the amount secured.
The seamless, cross-border execution of crime by the would-be techpreneur was brought to a just end when it was matched by equally seamless intercontinental and domestic collaboration among law enforcement and criminal justice partners. Joint efforts such as these showcase the transnational nature of the work of the FIC and its reach in the pursuit of financial crime.