Fraud, Corruption, Theft And Suspicious Transactions – Your Obligation To Report

It is likely at one stage in the running and management of a business, it will experience and/or be affected by the above commercial crimes. Our law does provide businesses and private individuals with various civil and criminal remedies. However it also, in certain instances, places a legal duty to report certain crimes as is more fully referred to below.

In South African law fraud is commonly defined as the unlawful and intentional making of a misrepresentation which causes actual prejudice or which is potentially prejudicial to another. It is important to note that the loss, damage or harm (prejudice) need not actually take place; rather that it had the potential to take place. An example of this is when you are presented with an invoice for payment, recognise that it is false so you do not pay on it. There was the potential that you could have paid on it, so it constitutes fraud on the part of the person who intentionally created it and presented it, in order to defraud the payee.

Theft is defined as the unlawful and intentional appropriation of a movable corporeal property. It must be remembered that unauthorised use of a property is a species of theft and theft is a continuing crime as the true owner remains prejudiced, hence the crime of being in possession of stolen goods.

Believe it or not the offence of corruption was only formally adopted into our law on 27 April 2004, with the promulgation of the Prevention of Corrupt Activities Act, Act 12 of 2004 (“POCA”). Up until then the prosecuting authorities would attempt to encompass corruption into some other existing crime.

Recognising that this could lead to some corrupt activities slipping through the cracks so to speak, POCA creates the general crime of corruption which applies to people in the private as well as public sphere. Three classic examples of corruption as provided for in POCA are:

• An employee, servant or officer of a private company or public office, offers to use his or her position in that private company or office to help a third party get something that third party wants, in return for money or a favour. In this example the offeror is guilty of corruption and if the third party accepts he too is guilty.
• A third party offers an employee, servant or officer of a private company or public office,  to use his or her position in that private company or office to help that third party get something that third party wants, in return for money or a favour. In this example the third party is guilty of corruption and if the employee, servant or officer he too is guilty.
• Someone who has concluded an agreement with a private or public entity has offered someone money to get that agreement or manipulate the price within the agreement.

There is no common law duty on people to report a crime. There are certain pieces of legislation which make provision for the reporting of a crime. In an effort to curb corruption and related crimes including theft and fraud involving an amount over R100 000.00. POCA places a duty on people in certain positions in a company to report certain crimes. In fact POCA provides that if certain people listed in it do not report certain crimes they have knowledge of or a suspicion of, they maybe guilty of an offence themselves.

Another piece of legislation which places reporting obligations on certain individuals and institutions is The Financial Intelligence Centre Act 38 of 2001 (“FICA”). FICA was promulgated with the objective of assisting with the identification and combating of money laundering activities, the financing of terrorist activities as well as to amend the Prevention of Organised Crime Act 121 of 1998 (“the Prevention Act”).

To give effect to these objectives, it places a duty on accountable institutions (as defined therein) to identify a client it intends to transact with. Further and in certain instances, individuals and accountable institutions are obligated to be active in reporting to the Financial Intelligent Centre created in terms of FICA.

These reporting events include when a cash transaction is over the prescribed limit or when the transaction is deemed to be suspicious in terms of the criteria provided for in FICA.

The duty to report a suspicious transaction must be treated very seriously because FICA places a wide onus as to who and when to report. In this regard FICA provides that;

“A person who carries on a business or is in charge of or manages a business or who is employed by a business and who knows or ought reasonably have known”.

Having regard to the fact that FICA defines knowledge of a fact:

“(a) the person has actual knowledge of that fact; or

(b) the court is satisfied that-

(i) the person believes that there is a reasonable possibility of the existence of that fact; and

(ii) the person fails to obtain information to confirm or refute the existence of that fact.

In relation to when a person ought reasonably to have known or suspected a fact FICA provides as follows:

“if the conclusions that he or she ought to have reached, are those which would have been reached by a reasonably diligent and vigilant person having both-

(a) the general knowledge, skill, training and experience that may reasonably be expected of a person in his or her position; and

(b) the general knowledge, skill, training and experience that he or she in fact has.”

As is the case with POCA a failure to comply with the reporting obligations provided for in FICA, is a criminal offence.

At Strauss Daly we pride ourselves in assisting our clients recognise and combat commercial crimes. In this regard we offer services which include the review of matters to identify whether it is a civil or criminal issue (or both) and in identify and compiling reports in terms of either POCA or FICA.

In addition we offer services which include forensic audits, assistance with laying commercial crime charges and the institution of civil legal procedures for damages and or loss suffered by the victims of commercial crimes.