Concern

Relevant provision

Letter to

1. The Bill (Act) contains serious flaws and draconian provisions which could seriously embarrass the government.

Act as a whole.

Office of the President
2 December 1998
Paragraph 1

2. Process of drafting and approving latest version of the Bill appears to be flawed. The original Bill published and debated was subsequently radically altered by the inclusion of the Proceeds of Crime Act.

Chapter 3 of the Act deals with the proceeds of unlawful activities (money laundering).

Office of the President
2 December 1998
Paragraph 2

3. It appears that the Department of Justice and South African Police Service were not consulted in the drafting of the new Bill.

Not applicable.

Office of the President
2 December 1998
Paragraph 3

4. Addressing money laundering is used as motivation for the draconian provisions of the Bill, whilst government has been tardy in passing the basic legislation, namely, the Money Laundering Control Bill

Preamble and Chapter 3 of the Act.

Department of Justice
3 December 1998
Item 1

5. The Bill refers to "unlawful activities" whilst the Proceeds of Crime Act refers to "crime". The implications of this change needs to be clarified.

Section 1(1)(xv) and Chapter 3 of the Act.
Proceeds of Crime Act, 1996

1.Department of Justice
3 December 1998
Item 2
2. Department of Justice
7 December 1998
Item 2

6.Section 1(2)(b)(ii) has the danger of implementing a legislated onus on a person to carry out an investigation beyond the nature of a person`s work requirements or personal capabilities. Criminals could further be tipped off unnecessarily.
It is recommended that the subsection should read : " (ii) he or she fails to obtain information within the normal course of his or her personal or business transactions to confirm the existence of that fact"

Section 1(2)(b)(ii) :
(2) For purposes of this Act a person has knowledge of a fact if-
(b) the court is satisfied that-
(i) the person believes that there is a reasonable possibility of the existence of that fact; and
(ii) he or she fails to obtain information to confirm the existence of that fact.

This provision is of particular importance with regard to the money laundering offences contained in Chapter 3 of the Act.

Department of Justice
3 December 1998
Item 3

7. Section 2(2) allows the court to have regard to hearsay evidence, similar facts and previous convictions. A sentence of a fine of R 1000 million or life imprisonment can be based on this type of evidence. The abrogation of the normal rules of evidence is a serious case of concern and will make the framing of innocent persons by authorities much easier.

Section 2(2) :
(2) The court may hear evidence, including evidence with regard to hearsay, similar facts or previous convictions, relating to offences contemplated in subsection (1), notwithstanding that such evidence might otherwise be inadmissible, provided that such evidence would not render a trial unfair.

Section 2(1) provides for the racketeering offences and section 3 prescribes a maximum penalty of a fine of R 1000 million or life imprisonment in respect of the racketeering offences. 1. Office of the President

2 December 1998
Paragraph 2

2. Department of Justice
3 December 1998
Item 4

8. The penalties prescribed in section 3(1) for section 2(1) offences are draconian if compared to the serious crimes listed in Schedule 1.

Section 3 prescribes a maximum penalty of a fine of R 1000 million or life imprisonment in respect of the racketeering offences provided for in section 2(1).

1. Office of the President
2 December 1998
Paragraph 2

2. Department of Justice
3 December 1998
Item 5

9. Section 6 has a pre-emptive requirement "acquires" and a post-facto one "uses or has possession". Honest people are particularly vulnerable where they discover after acquiring, using or taking possession that the property concerned is the proceeds of unlawful activities. As soon as they become aware of this fact they are guilty of an offence and have no justification in law.
It is recommended that, as with the similar provision in the Proceeds of Crime Act, the words "unless such person reports his or her suspicion or knowledge as contemplated in section 7" be added to section 6

Section 6:
6. Any person who -
(a) acquires;
(b) uses; or
(c) has possession,
of property and who knows or ought reasonably to have known that it is or forms part of the proceeds of unlawful activities of another person, shall be guilty of an offence.

Section 30 of the Proceeds of Crime Act, 1996

1. Department of Justice
3 December 1998
Item 6

2. Department of Justice
7 December 1998
Item 2

10. In terms of section 7 the onus to report suspicions rests on " Any person who carries on a business or is in charge of a business undertaking". There is no clarity who this "person" is in a major bank.
It is recommended that, in line with international legislation the section be amended to read "Any person who suspects, or ought reasonably to have suspected ...". This would then also include civilians and government bodies.

Section 7 of the Act provides that " Any person who carries on a business or is in charge of a business undertaking who suspects, or ought reasonably to have suspected that, inter alia, any property which comes into his or her, or the business` possession must report his or her suspicion to the person designated by the Minister of Justice and shall take all reasonable steps to discharge this obligation

epartment of Justice
3 December 1998
Item 7

11. It is recommended that suspicious enquiries and proposed transactions also be reported under section 7.

Section 7 of the Act.

Department of Justice
3 December 1998
Item 8

12. Section 7(6) is welcomed, but since there is now an element of distrust on the side of the reporting party, the designated person receiving the report should inform the reporting party within a specified period of time whether the suspicion is valid or not.

Section 7(6) provides that the party which has reported a suspicion may continue with the transaction concerned.

Department of Justice
3 December 1998
Item 9

13. The penalties of fines up to R 100 million or up to 30 years imprisonment provided for in section 8(1) are totally draconian and out of relation to the penalties for the serious crimes listed in Schedule 1 to the Act.

Section 8(1) prescribes a maximum penalty of a fine of R 100 million or 30 years imprisonment in respect of the money laundering offences provided for in sections 4,5 and 6.

Department of Justice
3 December 1998
Item 10

14. Section 12(3) links "unlawful activity" with "criminal activity". It is unclear whether "criminal activity" should not also be "unlawful activity".

Section 12(3) :
(3) For the purposes of this Chapter, a person has benefited from unlawful activity if he or she has at any time, ... received any advantage, payment, .... in connection with any criminal activity carried on by him or her or any other person.

Department of Justice
3 December 1998
Item 11

15. Sections 20(1)(b) and 20(4) appear to ignore most innocent third party interests in any property confiscated by the state.

Section 20 deals with the amounts that may be realised for the purposes of a confiscation order.

Department of Justice
3 December 1998
Item 12

16. It is recommended that the "14 days" in section 39(4)(b) be amended to read "45 days", in view of the time it takes for the Gazette to reach subscribers.

Section 39(1) provides that a preservation of property order shall be published in the Gazette as soon as practicable. In terms of section 39(3), a person who has an interest in the property which is subject to such an order may enter an appearance giving notice that he or she intends to oppose the making of a forfeiture order in respect of such property. Section 39(4) provides that the appearance shall be delivered to the National Director of Public Prosecutions within 14 days of publication of the order in the Gazette.

Department of Justice
3 December 1998
Item 13

17. In section 48(2) it is unclear what the reference to section 42(3) is, presumably this should be section 39(3)

Section 48(2) of the Act.

Department of Justice
3 December 1998
Item 14

18. In section 57(3) it is unclear why innocent third parties should be precluded from acting to protect their interests at an auction of forfeited goods.

Section 57(3) provides that no person who has possession or was entitled to possession, of forfeited property immediately before the forfeiture order took effect, shall be eligible to purchase forfeited property at any sale held by the curator bonis.

Department of Justice
3 December 1998
Item 15

19. It is unclear why remuneration, allowances and employment benefits contemplated in section 66, should be relevant with regard to the "committee" which consists of 3 Cabinet Ministers and the NDPP.

Section 65 establishes the Criminal Assets Recovery Committee which consists of the Ministers of Justice, Finance and Safety and Security, and 2 other persons designated if necessary.
In terms of section 66 the members of the Committee appointed under section 65(2)(e), (that is the 2 other persons designated if applicable), remuneration, allowances and employment benefits as may be prescribed.

Department of Justice
3 December 1998
Item 16

20. Subsection 68(c) should be deleted. If law enforcement officials do not see the benefit of their anti-crime efforts, then their efforts will be curtailed. The morally, socially and politically acceptable objective will always clash in priority with that listed in subsection (b).

The Criminal Assets Recovery Committee established under section 65 may in terms of section 69, inter alia, make recommendations to Cabinet with regard to the allocation of moneys from the account to law enforcement agencies (sub-section68(b)) and organisations which render assistance to victims of crime(subsection 68(c).

Department of Justice
3 December 1998
Item 16

21. It is unclear why a non-violent crime listed in section 71(3) should warrant a 20 year jail sentence

Section 71(3) deals with the confidentiality of information compiled by law enforcement agencies.

Department of Justice
3 December 1998
Item 18