By Candice Bailey
The latest high-profile money laundering case implicating Gauteng ANC chief whip Brian Hlongwa tells the tale of a plush life filled with tender favours for mansions, fully paid overseas holidays and personal helicopter trips across Johannesburg’s suburbs.
But woven into the intricate reams of court papers detailing how the former Gauteng Health MEC allegedly received lucrative kickbacks from businessmen friends, is a small gem that may have gone unnoticed.
Two builders, who were revamping a R7.2-million Bryanston house which Hlongwa purchased with the alleged help of these friends, have disclosed how Hlongwa allegedly gave them R500 000 in cash as part of an outstanding payment to them.
The information is contained in a statement put before the Johannesburg High Court as part of the National Prosecuting Authority’s application to declare Hlongwa’s mansion the proceeds of crime.
There are other details in the statement: Hlongwa had told them he had just sold a car; the money was contained in a black briefcase with a government department logo on it; the R500 000 was actually R2 000 short and contained some counterfeit notes.
Be that as it may, aside from providing a mental image of the lifestyle Hlongwa has lived, it has also highlighted a big flaw in the South African money laundering spectrum.
In an ideal South Africa, that transaction should have raised eyebrows and been flagged with the Financial Intelligence Centre as a possible suspicious transaction, according to the Financial Intelligence Centre Act (Fica). The centre would then do its own investigation to establish if the R500 000 was indeed the proceeds of a car sale or an ill-gotten gain.
Fica, which passed into law more than 10 years ago, is South Africa’s answer to preventing money laundering and terrorist financing mechanisms. The act mandates car dealers, banks, real estate agents, foreign exchange dealers, investment brokers and accountants, among many others, to declare any cash transaction over R25 000.
Jewellery dealers are not listed as accountable institutions, but as businesses they are, however, not exempt from declaring suspicious transactions.
Hlongwa’s alleged transaction – which is now being used as a bargaining chip by the builders for indemnity for providing honest testimony – is only one transaction in a minefield of similar transactions that take place. It shows, however, that the reporting of this possible suspicious activity is not happening.
And, it is the reason Corruption Watch is calling for the government to ensure that there is better enforcement of measures contained in the act. Few of the entities listed under accountable institutions would know that failing to report these suspicious transactions is punishable with a R10-million fine or 15 years in prison.
Transparency in business ownership and transacting
The call is part of Transparency International’s (TI) Unmask the Corrupt campaign, which Corruption Watch is leading in South Africa in the same way that national chapters in 10 other countries are running the global advocacy group’s campaign in their countries.
Later this year the campaign will roll out to the rest of the TI movement spanning most of the world.
Declaring suspicious transactions in the purchase of luxury goods is one part of it – the other call is for the Department of Trade and Industry, which oversees the Companies and Intellectual Properties Commission to provide for a public registry of shareholders in companies.
Currently director registries are fully available, whereas shareholding certificates of a company are only issued on request, at a nominal fee to the public, according to the Companies Act.
In reality though, there is no regulator ensuring that the certificate provided is the most up to date one or that it is not fake. And although this presents a problem for the public, police sources have confessed to Corruption Watch that they suffer the same frustrations in trying to access shareholding certificates.
Asset Forfeiture Unit head Willie Hofmeyr, who forms part of the Anti-Corruption Task Team that investigates cases of money laundering, also admitted that a lack of shareholding registers is “generally a problem in the asset-tracing business”.
While shareholding was a challenge, family and other trusts presented an equal challenge in the process of freezing bank accounts linked to trusts as one was not able to pinpoint a specific person’s account when it was a trust, said Hofmeyr. He added that while South Africa has the legislation to counter corruption and money laundering, prosecution is still a challenge.
That however was partially a capacity problem, said Hofmeyr, and it was not all doom and gloom. “We have achieved a lot on the corruption front.”
In the 10 years leading up to 2009, the Asset Forfeiture Unit froze R250-million in assets linked to corruption cases. From 2009 to 2013, it has frozen an additional R200-million a year. Between January and last month this year alone, the same unit has tallied R1.8-billion in frozen assets so far.
“Our weakness is that we have done few straight money laundering cases.”
Money laundering prosecutions in progress
While on the face of it, it appears that most of the high-profile cases, like the preservation order linked to Hlongwa’s mansion, date back eight years, there are a number of more current cases.
Hofmeyr cited the cases of ANC NEC member Pule Mabe and former National Youth Development Agency head Andile Lungisa.
Mabe, who is a former ANC Youth League treasurer, faces charges of fraud, theft and money laundering for allegedly unlawfully receiving funds from the South African Social Security Agency.
Lungisa faces charges of fraud and money laundering for accepting R2.5-million from the Gauteng Arts and Culture Department for a Nelson Mandela Sports Day concert, which should have featured US singer R Kelly.
“When the Anti-Corruption Task Team was established in late 2010, it picked up a number of cases. By its nature, many (money laundering) cases take a long time to investigate,” explained Hofmeyr, adding that in a way South Africa is still dealing with a backlog of money laundering cases.
South Africa lagging in anti-bribery action
Hofmeyr’s sentiments can be viewed in line with a report released by the Organisation for Economic Co-operation and Development (OECD), which has been evaluating how South Africa has been implementing its anti-bribery conventions since it became a signatory.
The OECD report, released in March, stated that “a cross-section of non-governmental groups viewed South Africa’s ability to investigate, prosecute, convict and punish those who engage in corruption as somewhere between limited and almost completely non-existent”.
While the global organisation approved the country’s Prevention of Organised Crime Act, saying it allowed for the broad use of freezing orders and confiscation measures, it added that corruption remains a serious problem in South Africa.
“The country has experienced a number of high-profile domestic corruption scandals, and corruption allegations have been linked to the highest levels of government,” it said.
Weak enforcement efforts were underpinned by a lack of independence and susceptibility to political interference, as well as a need for better co-ordination and specialised expertise, said the report.
Other countries also struggling to prosecute
In all fairness, lengthy investigations in money laundering cases are however, not only a local problem.
In France, Transparency International has been fighting for over seven years to successfully prosecute Equatorial Guinean vice-president Teodoro Nguema Obiang, the son of President Teodoro Obiang Nguema Mbasogo.
Obiang became a household name in South Africa eight years ago when he grabbed media headlines for spending more than R10-million in one weekend in South Africa, purchasing two Bentleys and a Lamborghini during a 48-hour jaunt.
He also spent more than R60-million on houses, including a Clifton house for R23.5-million and another house in Bishopscourt for R26-million.
The French investigation into Obiang is part of a larger investigation into three African heads of state – Congo Brazzaville’s Denis Sassou N’Guesso and the late Omar Bongo-Ondimba of Gabon, who Transparency International France believe all have properties and assets in the country worth millions and acquired through ill-gotten gains.
Marina Yung of Transparency International France told Corruption Watch that although the judicial investigation was opened in January 2011, there was no final court date. However, earlier this year France issued an international warrant of arrest for Obiang and has seized a mansion it believes he has bought with the proceeds of crime.
“We don’t know if and when the case will go to court. The judges will take a decision at the end of the judicial investigation,” Yung said.
While the French investigation continues, South Africa has not investigated Obiang’s local purchases and has allowed him to leave the two homes, which have been standing empty, to become derelict.
This is despite Obiang, in a civil claim in the Cape Town High Court several years ago, admitting that the homes were purchased with funds from an account held by his country, in the name of a company he owned.
Obiang’s free rein in purchasing luxury goods in South Africa, as well as cases like Hlongwa’s, show that money laundering is not just a local problem but an international one, in which South Africa still has several loopholes.
In leading the Unmask the Corrupt campaign, Corruption Watch will propose closing loopholes in South Africa’s anti-money-laundering legislation and most importantly, push for its robust enforcement.
* Candice Bailey is an investigative journalist at Corruption Watch. Contact her at email@example.com. This article was first published in the Sunday Independent.