SUBMISSION BY THE RAU CENTRE FOR THE STUDY OF ECONOMIC CRIME (CENSEC): PROTECTION OF CONSTITUTIONAL DEMOCRACY AGAINST TERRORIST AND RELATED ACTIVITIES BILL B12-2003
suspected. The result is so extraordinary and draconian that it raises serious constitutional concerns.
It therefore submitted, with respect, that the test for knowledge in clause 1(6) of PROCDATRA should be replaced with the text of the test for knowledge in section 1(2) of POCA.
2 The Bill's definition of "property" differs from the definitions of POCA and FICA
PROCDATRA has a detailed definition of "property" in clause 1. POCA and FICA also defines "property", but those definitions are narrower than the PROCDATRA definition. The difference becomes relevant in respect of the reporting obligation in terms of section 29 of FICA, as amended by PROCDATRA. In terms of section 29 business must report:
- any transaction involving proceeds of unlawful activities (including property that is the proceeds of such activities); and
- any transaction involving property linked to financing of terrorist activity.
However, "property" in relation to money laundering is defined differently to "property" in relation to terrorist financing. The difference will cause great difficulty for businesses that have to train customer contact personnel to identify and report the relevant transactions' The resultant uncertainty will affect compliance with the law.
In terms of section 43 of FICA accountable institutions have a statutory duty to train their employees.
It therefore submitted, with respect, that the definition of "property" in PROCDATRA should be amended to resemble the POCA and FICA definitions.
3 Certain persons who file a report in terms of PROCDATRA may expose themselves to a prosecution as a result of their report
Clause 12 of PROCDATRA creates a reporting obligation: Any person who -
- has reason to suspect that any other person intends to commit or has committed an offence referred to in Chapter 2 of the Act; or
- is aware of the presence at any place of any other person who is so suspected of intending to commit or having committed such an offence,
must report or cause that suspicion or presence to be reported.
A person who harboured or concealed a terrorist, but files a clause 12 report, is protected by clause 17(5) against a prosecution. However, a person who reports a suspicion of a terrorist financing transaction is not afforded the similar protection where he or she participated negligently in the transaction. If, for instance, a bank official unwittingly facilitates a terrorist financing transaction, but realises afterwards the nature of the transaction, the person has a dilemma. She may wish to do her civic duty, but if she files a report in terms of clause 12 she may be prosecuted in terms of clause 4 for negligently facilitating a transaction which she ought reasonably to have suspected as being a terrorist financing transaction. A lawyer will probably advise such a person to exercise her right of silence and not to file a report. However, that will mean that law
enforcement will not receive a vital piece of intelligence.
It is submitted, with respecf, that the clause 17(5) reporting defence should be extended to parties who file reports relating to terrorist financing. It is submitted that it could be done in the following way:
1 By inserting the following text into clause 12(1): "... must report as soon as reasonably possible such suspicion or presence... "
2 By inserting into clause 17 a clause based on section 7A of POCA:
"If a person is charged with committing an offence undersection 4, that person may raise as a defence that he or she acted bona fide and reported his or her suspicion in accordance with section
12."
4 Additional grounds for filing reports in terms of section 29 of PICA
PROCDATRA will amend section 29 of FICA to render reportable to the Financial Intelligence Centre, any transaction or series of transaction to which a business is a party and which -
"is unnecessarily complex, or forms part of an unusual pattern of transactions or has no apparent business or lawful purpose" (the underlined portion currently forms part of section 29).
1 The phrase "unnecessarily complex" will compel financial institutions to train (In terms of section 43 of FICA accountable institutions have a statutory duty to train their employees) employees to distinguish between what is necessarily complex and what is unnecessarily complex. Complexity of transactions may be caused by different factors, for instance international operation, tax considerations or the complexity of the subject matter. It is very difficult in many cases to make the judgement call that is required by this phrase. The pressure to correctly identify a reportable transaction is caused by the fact that a negligent failure to identify and report such a transaction is an offence that carries a maximum term of imprisonment of 15 years and a maximum fine of RIO million. It is submitted that the phrase "unnecessarily complex" should either be deleted or qualified to ensure that it is practical.
2 The focus on transactions that form part of an "unusual pattern of transaction" is also problematic. Many citizens engage occasionally in transactions that may deviate from their usual pattern. A wage earner's account, for instance, displays a particular pattern. If that person sells her
house and buys another house, the flows of money into and out of her account will be highly unusual for her account. However, in many cases the bank would be the bond holder and would know why she concluded transactions that are unusual for her account. As currently phrased, the
bank officials would still have to report those transactions even though they know that the transactions are innocent. This results not only in unnecessary costs for the bank but will also lead to the Financial intelligence Centre being flooded by large numbers of reports that have little value for law enforcement (if the phrases must be retained, they could be retained as indicators in stead of grounds for a report, for instance "Persons are required to pay particular attention to transactions that appear unnecessarily complex or forms part of are unusual pattern of transactions").
It is submitted that the Financial Intelligence Centre should be requested to urgently furnish the Committee with a report outlining:
- their views regarding the appropriateness of these amendments,
- the impact that the amendments will have on accountable institutions,
- the value ofthe information that will be reported; and
- the number of reports that are expected as a result of these amendments.
Such a report should enable the Committee to make an informed decision regarding the proposed amendments.
Yours sincerely
Prof Louis de Koker
Director: Centre for the Study of Economic Crime