Towards developing a legal framework to combat money laundering and tax evasion in South Africa

PhD (Taxation), North-West University, Potchefstroom CampusCorruption has shown an increase in South Africa over the last few years, with citizens demanding justice for those implicated. There are regular reports in the news on corruption exposed (usually within government); however, reports on arrests or sentences are not as frequent. The question arose as to why there are so few arrests and sentences. Many answers may be found, but one that stood out was the lack of an independent law enforcement agency that can act without fear, favour or prejudice. The researcher set out to develop a legal framework with law enforcement and financial intelligence to combat economic crimes such as tax evasion and money laundering. The research was conducted in the interpretive paradigm, utilising qualitative methods, which led to doctrinal, legal interpretive research. Consultations with experts were held where-after a thematic network analysis were done to group the basic themes, organising themes and the global theme together. The independent anti-corruption agency (the framework) was also tested against a South African corruption case. By comparing South Africa’s legislation to the United States of America, the United Kingdom and Australia, it was found that it is not the legislation that is at fault, but rather the enforcement thereof. Since the Scorpions have been disbanded in 2007, South Africa does not have a crime fighting agency with the necessary independence needed to effectively combat crime. The Hawks, who took over from the Scorpions, were incorporated into the South African Police Service and it was established by the Constitutional Court that they (the Hawks) are not sufficiently independent. The Hawks is not nearly as successful as their predecessors. This statement can be substantiated by referring to the decline in the number of convictions and prosecutions. There was a decline of 60 percent and 80 percent, respectively. The legal framework took the form of an independent anti-corruption agency, because it was found that corruption can take on many forms, of which tax evasion and money laundering are just two of them. The suggestion to incorporate this agency into the National Prosecuting Authority (NPA) was based on the investigative and prosecutorial powers of the NPA. Changes to South Africa’s legislation, the NPA and the Financial Intelligence Centre will be key to ensure the success of the findings. As part of this independent anti-corruption agency, an Administration Penalty Unit was also developed. Nothing similar to this type of unit exists in South Africa. This Administration Penalty Unit is based on the United States’ Department of Justice and the Securities and Exchange Commission’s partnership with regard to the Foreign Corrupt Practices Act (1977). It will offer corporations the option to self-report if corrupt activities were identified in order to escape criminal prosecution (should this be a first-time offence). Non-prosecution agreements will be entered into, giving the corporation the chance to eradicate the corrupt activities and to get their policies and internal control procedures in place. Although they will not be prosecuted, an administrative penalty will be payable, of which the amount will depend on the scope of the corruption. After consultations with experts, as well as applying it to a South African corruption case, it was found that this legal framework may assist in the fight against economic crimes in South Africa.Doctora