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South Africa Publishes More About Money Laundering Vulnerabilities

As noted in a prior blog post, South Africa’s Financial Intelligence Centre (“FIC”) periodically releases financial crime typologies and case studies. Recently it published information about typologies in two different lines of business: (1) casinos and the gambling industry, and (2) the property sector, discussed in this post.

The Property Sector

The FIC’s publication encourages those dealing in South African real estate to be aware of money laundering relating to the sector. The FIC describes the industry as an “attractive destination for illicit funds.” According to the FIC, South Africa’s “property environment, including renovation and improvements, is often associated with criminal proceeds related to corruption and narcotics as well as a variety of other predicate offenses.”

Illustrations

Money laundering vulnerabilities in the property sector can arise in various ways. One example the FIC discusses is the concealment of criminal ownership by using nominees and front companies. Other examples of money laundering in the property sector include the financing of property through bonds, and the purchase of income-generating property that allows a criminal entrepreneur to comingle legitimate rental income with criminal revenue. The FIC also notes that flipping property to “take advantage of the sizeable underground, cash-based home renovation industry,” and under-invoicing on purchase prices are other ways persons may launder money in the property sector. The FIC provided numerous indicators of potential money laundering in the property sector. For example:

  • Purchases involving large cash amounts

  • A prominent influential person (“PIP”) investing in property

  • An unnecessary use of third parties during the property transaction

  • Unusual methods of payments

  • Transactions entered into at a value significantly higher or lower than the market value of the property

Case Study of  a Foreign PIP

The FIC also provided three case studies relating to the property sector. One case study involved properties linked to a foreign PIP, who allegedly had involvement in embezzling money from the PIP’s home jurisdiction. Investigations revealed that the PIP used a South African lawyer to purchase the property and utilized a shell company registered in another jurisdiction. The property was ultimately restrained and forfeited to the PIP’s original jurisdiction where the funds had allegedly been misappropriated.

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About this Author

Rebecca Worthington, Squire Patton Boggs Law Firm, Washington DC, Corporate Law Litigation Attorney
Senior Associate

Rebecca Worthington’s practice focuses on litigation, investigations and white collar criminal defense. She has experience in defending cases brought under the False Claims Act and representing clients in internal and government investigations, including matters involving economic sanctions and the Foreign Corrupt Practices Act. She has been named a Washington DC Super Lawyers – Rising Star, among the top up-and-coming lawyers, defined as 40 years of age and younger or in the practice of law for less than 10 years.

202-626-6654
Thomas E. Zeno, Squire Patton Boggs, Healthcare Fraud Lawyer, Economic Crimes Attorney
Of Counsel

Thomas Zeno has more than 25 years of experience in the US Attorney’s Office for the District of Columbia. During that time, Tom investigated and prosecuted economic crimes involving healthcare, financial institutions, credit cards, computers, identity theft and copyrighted materials. As the office’s Healthcare Fraud Coordinator for the last eight years, Tom supervised investigation strategies of agents from the Federal Bureau of Investigation, the Department of Health and Human Services, the Drug Enforcement Administration and the Medicaid Fraud Control Unit regarding healthcare offenses. He also served as the liaison with the office’s civil division on joint proceedings. In addition, Tom served for several years as the Executive Assistant US Attorney for Operations, where he helped supervise the criminal division of the office.

202 626 6213