Fighting financial crime

As a career professional in public prosecution, Advocate Xolisile Khanyile has been able to see the impact of financial crime through a variety of lenses. In 2018, when she was appointed Director of the Fi- nancial Intelligence Centre (FIC), she was well-placed to steer the organisation toward progressing its fight against financial crime.

The FIC is mandated to identify the proceeds of crime and assist in combating money laundering, as well as terrorist and proliferation financing. As South Africa’s financial intelligence unit, the FIC is the only entity authorised to receive transactions and other data from institutions that are listed in the FIC Act, 2001 (Act 38 of 2001).

These include banks, real estate agents, money remitters and gambling institutions. The institutions are required to register with the FIC and sub - mit regulatory reports, among other compliance obligations.

In 2021/22, the FIC received more than 5 million regulatory reports. The reports are interpreted and analysed as a precursor to the FIC developing products such as financial intelligence reports. In turn, the centre’s intelligence and other products are used by law enforcement, revenue services and other competent authorities for their investigations, prosecutions and applications for asset forfeiture.

Rooting out individual and syndicated crime

Through the use of the FIC’s financial intelligence, more than R5.1 billion was recovered in 2021/22. In this way, the FIC plays a central role in the pursuit of crime and the criminal justice value chain, which is essential as the centre is not mandated to conduct investigations.

“Focusing on following the money is essential to uncovering individual and syndicated crimes and criminal behaviour,” says Khanyile.

“It is most crucial that we take away the business of crime, the profitability, from criminals,” she adds

Khanyile believes that nurturing collaboration and forging partnerships is an important aspect of fighting financial crime.

“I believe financial intelligence units across the globe cannot make inroads on the fight against crime on their own. We need to work collaboratively and cooperatively to build knowledge and increase capacity in the fight against financial crime,” says Khanyile.

It is this collaborative approach that Khanyile is also embedding at the Egmont Group of Financial Intelligence Units, to which she was appointed as Chair in July 2022. The Egmont Group, with a membership of 166 financial intelligence units, facilitates and prompts the exchange of information, knowledge and cooperation among its members.

The power of collaboration

One initiative that Khanyile is most proud of is the publicpublic collaboration of the Fusion Centre. This alliance of law enforcement authorities and investigative bodies in the Justice, Crime Prevention and Security Cluster and the FIC, has made significant headway since its work took off in 2020.

“As a collective of law enforcement agencies, the Fusion Centre has preserved and recovered approximately R1.75 billion in criminal assets, since its inception two years ago. Of this amount, at least R660 million was preserved and recovered in the previous financial year,” she says.

The FIC also championed the creation of the public-private partnership of the South Afri- can Anti-Money Laundering Integrated Task Force (SAMLIT). The partnership is made up of the Prudential Authority of the South African Reserve Bank, 26 domestic and foreign banks registered in South Africa and banking industry representatives.

The purpose of the task force is to enhance the regulatory reporting regime by allowing SAMLIT members to have a coordinated, team-based and targeted approach in fighting financial crime. This allows the FIC to sit with several banks in one room with tactical operations groups (made up of SAMLIT members) and receive information from several banks on a specific matter.

Through the partnership, the FIC can receive a comprehensive, better and single view of the subject's suspicious financial transactions from several banks instead of a single transaction report emanating from one bank. This better view allows the centre to submit detailed, comprehensive and actionable intelligence to law enforcement agencies. In this way, there is a close working relationship under the umbrella of SAMLIT and the Fusion Centre, allowing the Fusion Centre to speedily entertain comprehensive intelligence reports prepared by the FIC, emanating from the tactical operations groups of SAMLIT. The taskforce also has various expert working groups, which conduct research on specific crimes to develop trend analysis for use by the members. Three research projects have been concluded – illegal wildlife trade, terror financing, and modern slavery and human trafficking.

National risk assessment

In addition, through its partnership and collaboration, the FIC led the development of the National Risk Assessment on Money Laundering, Terrorist Financing and Proliferation Financing. Once published, this assessment will allow the country to reprioritise and focus its resources on combating the high-risk threats identified in the national risk assessment.

“Much good work has been done by the team that produced this document without outsourcing this huge task,” says Khanyile, adding that, “Some of the high risks identified in the assessment were the use of cash, corruption and bribery, tax-related crimes, fraud, cybercrime, illicit wildlife trade and environmental crimes, modern slavery, human trafficking and illegal mining”.

Khanyile is of the view that for the country to strengthen the fight against financial crime, there is a need to start building fit for purpose skills, such as forensic accountants, cyber experts, data technologists, financial investigators and analysts. “Half of the reported crimes in the country are financial crimes and our resources need to match our high risks”, she says.

She believes that it is the responsibility of every South African to play a role in the fight against corruption and in the implementation of the country’s national anti-corruption strategy.

Khanyile says the responsibility to fight corruption extends to all who work in the public service.

“It is our duty and obligation to be alert to and desist from engaging in corrupt activities. What we need to remember at all times is that if we do engage in corrupt activities, the negative impact is felt by us all socially, economically and we all suffer due to the loss to the fiscus as a result”.

Challenges

Despite the FIC’s achievements, Khanyile says a key challenge is for the FIC to retain its talent. Due to their technical abilities and skills, the employees are sought after by the private sector.

“In comparison to the previous financial year, the FIC experienced a significant increase in the number of voluntary resignations. This decreased the employee complement from 205 to 183, against the FIC’s approved establishment of 216,” says Khanyile.

Based on the FIC’s achievements, strategic initiatives and partnerships over the last few years, Khanyile believes she has created a legacy that will stand the centre in good stead now and in the future.

Khanyile holds a Master of Law degree from the University of the Free State, a Bachelor of Jurisprudence and Bachelor of Laws from the University of Zululand, as well as a Management Development Programme qualification from the Business School of the University of the Free State.