SHAPE-SHIFTING SOUTH AFRICAN MONEY LAUNDERERS CONTINUE TO OPERATE WITH IMPUNITY IN A FINANCIAL ENVIRONMENT WITH CORRUPTION ISSUES

Company A becomes Company B, becomes Company C, etc.

We note that the low level of success of anti-money laundering compliance programmes in the Republic of South Africa is reportedly due in large part to a technique described there as "Shape-Shifting," which is the movement of money laundering operations from one corporate entity to another and then in turn to another, successively, to avoid establishing any pattern of deposits or wire transfers.from any one corporation or business organization. Apparently, the moment the laundrymen sense any monitoring of an account, or customer queries made or entered, entirely new business entities are activated, through other accounts, to continue to move criminal proceeds with impunity. The technique is said to be exceptionally successful in South Africa, where very few laundering operations result in discovery, interdiction, arrest and conviction.

The enterprising laundrymen make identification of the successor companies difficult by giving them deceptively similar name to legitimate businesses, by using names that appear to be subsidiaries of established companies abroad, and by making small changes or additions to the names of known businesses, to confuse and deceive compliance officers in passing them as low-risk.

South African banks are also often victims to corruption of low-level, underpaid frontline bank staff, who are susceptible to bribes and other illicit forms of compensation, to cause them to ignore suspicious transactions. This problem, which merely reflects South Africa's known high level of corruption, can only be combatted through increased monitoring of staff,and expense which most SA banks appear to be disinclined to do.

These issues have created a perfect storm for money laundering in South Africa's financial industry, and until increases in AML training, and staff video monitoring occur, we will continue to see that most money laundering operations through SA banks are not discovered in real-time.