Time running out for South Africa

The National Prosecuting Authority’s (NPA) new plan to partner with the private sector and get South Africa off the grey list is a positive step but is not a quick fix, and time is running out for the plan to bear fruit.

This is according to James Saunders, co-founder and CTO at RelyComply, a regulatory technology software provider.

Saunders welcomed the news that the NPA seeks private sector expertise to form a digital evidence unit to help prosecute complex state capture cases. 

“However, the development will not be a quick fix for South Africa’s longstanding weaknesses in addressing corruption and financial crime,” he said.

Saunders said the bold move could help South Africa accelerate its removal from the Financial Action Task Force’s (FATF) greylist, which the country entered last year.

In February 2023, the FATF added South Africa to its list of nations with shortcomings in tackling illicit financial flows.

The move followed an era of endemic government corruption – known as state capture – that started under former President Jacob Zuma and gripped the country for years. 

Now, South Africa has until February 2025 to address 22 key factors the FATF identified to get off the list. 

By August, South Africa had only completed eight action items, and the country has two reporting cycles – due in September and January – to address outstanding issues. 

To accelerate South Africa’s progress, the NPA plans to form a digital evidence unit that involves the private sector.

The unit will supplement the Directorate for Priority Crime Investigation’s (Hawks) resources with local and international private sector expertise in forensics. 

Saunders said this will help to address a shortfall in resources and specialist expertise in handling complex financial crimes, especially in analysing complex digital evidence for financial crime investigations. 

It also involves helping the NPA extract evidence from encrypted devices.

However, Saunders cautioned that the government, financial institutions, and other roleplayers should be alert to the risk of unintended consequences of this development. 

The NPA announced the initiative following the first joint meeting between the Presidency and Business for SA (B4SA) since the May elections.

This initiative is a collaboration between the public and private sectors to address some of South Africa’s most pressing issues, including energy, logistics, and crime and corruption.

According to Saunders, the cooperation between government and business has positively impacted transport and logistics, but interventions for crime and corruption have yet to yield similar results.

He said that one of the complexities lies in the police and NPA’s need to remain independent from private interests, necessitating the creation of ethical walls between the institution and the new initiative. 

While these barriers are essential to mitigate the risks of undue interference, they may constrain the group’s efficiency and effectiveness.

“It is encouraging that the NPA is moving with a sense of urgency to resolve priority points from an existing 22-item action list ahead of the next FATF meeting in January 2025,” Saunders said. 

“However, this announcement raises a number of questions about the role of financial institutions and the impact on the wider private sector.”

Firstly, Saunders said that setting up a private body to help prosecutors raise questions about where non-government funds come from. 

“If large banks have to back the project, it’s another expense added to the high cost of compliance these institutions already have to bear,” he said. 

“They might not have the capacity to sustain this level of support indefinitely.” 

Secondly, he pointed out that there’s a rush to resolve the compliance priorities, which raises concerns about whether this unit is a quick fix. 

“What happens if it’s shut down as quickly as it was started up? Conversely, is a dedicated unit a more efficient long-term solution than capacitating the Hawks and NPA for digital forensics and complex financial cases?” he said.

Lastly, banks are already highly regulated due to complex anti-money laundering procedures and may see themselves as targets on the radar of the NPA’s specialist digital evidence project.

“With only five months to resolve requirements, time is running out for the government’s plans to bear fruit,” Saunders said. 

“The upside is that the concerns I’ve raised can be navigated, provided the unit effectively uses knowledge from those on the frontlines of financial crime and regulatory compliance.” 

“This initial move could lead to more informed collaborative action to keep financial crime at bay.”