The extent and complexity of fraud, corruption, money laundering and associated financial crime schemes are spiraling out of control globally. Legislation, regulations, and policies established and implemented around the world to combat white-collar crime have yielded limited success.

The above is duly reflected in the ACFE 2022 report to the nations, with corporates annually losing an average of 5% of revenue due to occupational fraud. Money laundering is estimated at 5% of the global GDP, exceeding US$ 2 trillion, and the cost of bribery and corruption in developing countries exceeds US$ 40 billion.

We have grown so used to the daily media exposing bribery, corruption, money laundering, and how taxpayers’ money is being stolen or mismanaged in South Africa. Even after all the revelations of the state capture investigation and the release of the Zondo Commission findings, we are still seeing evidence of new incidents of corruption, irregular award of tenders, and maleficence. Prominent in the news at present is the possible grey listing of South Africa. The implications thereof, should it happen, are of real concern and are frequently discussed on different media platforms.

According to a report commissioned by Business Leadership South Africa, Intellidex found that there is an 85% chance that South Africa will be grey listed. The risk is high because South Africa, according to the Financial Action Task Force (FATF), does not do enough to identify, act, and prevent money laundering and the financing of terrorism. The FATF is a global body that oversees compliance with anti-money laundering and counter-terrorism financing measures. According to its assessment, South Africa was only partially compliant on some, but non-compliant on several of its 40 recommendations.

While we await the outcome of the pending grey listing at the end of October 2022, there are some measures that Government and private businesses can put in place to soften the blow before the FATF effective date in February 2023. According to the FATF, South Africa has deficiencies in various areas, amongst others:

  • the lack of prosecution and convictions for state capture crimes;
  • the identification of terrorist financing and money laundering;
  • the management of know-your-customer and politically exposed people;
  • the ability to predict and prepare for offenses.

If South Africa is grey listed, it will have a severe impact on our already struggling economy, still recovering from the impact of COVID 19. The effect will be felt by corporates, SMEs, and QSEs, and we can expect an average decline in capital inflow of up to 7.6% of our GDP, up to 3% in foreign direct investment, and a decrease in portfolio inflow of 2.9%of GDP, according to economists.

The measures that Government and private businesses can put in place to assist and ensure that the impact is not that severe include the implementation of an effective measurable management process to demonstrate and ensure that all the requirements of the FATF are met. Compliance with the newly implemented standard and management system should become a minimum requirement for any organisation that wishes to engage with Government in any business transaction and/or service offering, and evidence of compliance thereto must be readily available.

The International Organisation for Standardization (ISO) provides a strong basis for the development of national and international regulations, which saves time and reduces barriers to international trade. ISO 37001, an Anti-Bribery Management System (ABMS) is designed to help companies prevent, detect, and respond to bribery incidents. The standard also includes compliance with laws, regulations, and other voluntary commitments.

The integration of an anti-bribery management system into routine operations allows organizations to use international standards to detect and mitigate probable apparent forms of bribery. This standard can be used by any organization, large or small, whether public, private, or voluntary, and in any country globally. It is a flexible tool, which can be adapted according to the size and nature of the organization and the bribery risk it faces. An effective anti-fraud, corruption, bribery, and money laundering management system assists Organisations to:

  • Establish efficient mechanisms for preventing, detecting, and addressing these risks.
  • Protect its reputation and brand image.
  • Encourage trust and confidence among business partners, investors, clients, and employees.
  • Reduce the damage resulting from these acts by establishing efficient mechanisms to track transactions. Ensure compliance with national and international laws and regulations.
  • Ensure sustainability.

The ISO Standard has 10 clauses and an organisation that seeks to successfully establish, implement, maintain, and continuously improve an anti-fraud, corruption, bribery, and money laundering management system must meet the requirements of clauses 4-10 of ISO 37001.

Strategic management focuses on maximising profits, sometimes irrespective of how this is achieved. Organisations need to act ethically and be transparent in every business transaction. We often find that employees from all levels within organisations are caught up in acts of fraud, corruption, and bribery to achieve the profit targets set by management.

The ISO standard prescribes the best strategies to manage an organisation’s risk of fraud, bribery, and corruption. Management needs to demonstrate leadership and commitment to the anti-bribery, fraud, corruption, and money laundering management system by ensuring that the system, which includes policy and objectives, is established, implemented, maintained, and reviewed to adequately address the risks associated with acts of this nature. ISO 37001 not only facilitates effective controls in the war against corruption but also promotes the efficiency and productivity of an organisation.

Transparency and trust are the building blocks of any successful organisation’s credibility. Nothing can ruin an organisation’s reputation and credibility as quickly as rumours that an organisation is involved in acts of fraud, bribery and money laundering. Implementing the ISO 37001 management system will protect your reputation and brand, promote trust and confidence, and establish a strong anti-bribery, fraud, corruption, and money laundering culture among all employees. This in turn promotes trust and confidence with clients, business partners, investors, and other clients knowing that there is an effective management process in place to mitigate risks of this nature.

It will become increasingly more difficult to conduct business in South Africa and with Government organisations without demonstrating that an effective anti-bribery, fraud, corruption, and money laundering management system is established, implemented, maintained, and continually reviewed and improved in organisations.

Verifiable evidence to support compliance will soon become the minimum requirement during business negotiations, tender processes and contractual obligations. Hence, it is the right time for all governmental and non-governmental organisations irrespective of the size and nature of their business, to embrace these management processes and demonstrate responsibility to conduct business ethically and transparently and ensure sustainability.

Johan van Dyk
Executive Head: XTND