In hopes of tackling the pervasive issues of corruption and money laundering in South Africa, a key recommendation from the State Capture Commission has now been enacted into law, which holds individuals criminally liable if they fail to prevent corruption.

The recently accented Judicial Matters Amendment Bill includes an amendment to South Africa’s primary anti-corruption legislation, the Prevention and Combating of Corrupt Activities Act (PRECCA), in the form of a new clause which created an offence for a failure to prevent corrupt activities.

In terms of the new clause, a “member of the private sector or incorporated state-owned entity” will be held criminally liable if a person/people associated with them, such as employees or other third parties, gives, agrees, or offers to give any gratification to another person intending to obtain or retain business or an advantage for that member.

The penalties include a fine or imprisonment.

“The introduction of the new failure to prevent corrupt activities offence constitutes a significant change to South Africa’s anti-corruption legal landscape,” aligning ” South African law with international standards,” said forensic experts at ENS Africa, Steven Powell and Adrian Roux.

The experts said that the new legislation addresses “valid concerns that the government has been slow to implement the State Capture Commission recommendations and should provide further impetus to the concerted efforts currently under way to persuade the Financial Task Force to remove South Africa from the ‘Grey List’.”

This has ultimately made it “crucial for organisations to establish strong anti-corruption compliance programmes,” added Powell and Roux.

Some key takeaways

While there are many aspects of the new offence which “require careful consideration”, Powell and Roux outline a few key takeaways to consider, including:

• No offence will be committed if the member had in place “adequate procedures” designed to prevent associated persons from committing corrupt activities.

“In the absence of further clarity, it would be advisable for South African entities to adopt an approach to adequate procedures which mirrors the [UK’s] ‘Six Principles’ approach,” said Powell and Roux.

These are principles in which commercial organisations adopt “adequate procedures” to prevent bribery being committed on their behalf.

The “Six Principles” include proportionality; top-level commitment; risk assessment; due diligence; communication; and monitoring and review.

• The concept of “association” for the purpose of the offense is defined in broad terms. It encompasses individuals who render services for or on behalf of a member, regardless of the nature of their service or their position.

“Section 34A casts the net of association broadly and would include not only employees but also independent contractors and other third parties providing services to the entity,” said the experts.

“It will therefore be important to ensure anti-corruption risk mitigation controls are sufficient to cover such third parties,” they added.

• South Africa does not have a prosecutorial regime which allows for entities to enter into deferred prosecution agreements (DPAs).

DPAs have been used in both the US and the UK as a mechanism to encourage organisations to self-report wrongdoing in exchange for the imposition of a reduced fine and avoiding prosecution.

This is not addressed in the amendment, but Powell and Roux said that “President Ramaphosa previously confirmed that the South African Law Reform Commission is considering DPAs as part of its review of the criminal justice system.”

In the meantime, the National Prosecuting Authority is utilising the Corporate Alternative Dispute Resolution Directive to achieve similar results.

Expect more anti-corruption initiatives

Powell said that this is one of an expected “spate of new initiatives by government, [including] new pieces of legislation that has been promulgated to try and ensure that our systems are robust and that we have sufficient [measures] in place to address corruption.”

“2024 is going to be a watershed year, it’s an acid test for the South African government to demonstrate to the financial action task force and the world that we are doing enough to clamp down on corruption, and money laundering,” said Powell.

source:Failing to prevent corruption is now a criminal offence in South Africa – BusinessTech