With the United Kingdom (UK) and US authorities updating their laws to tackle international corruption, there are now indications that the two countries may begin to actively step in against graft in South Africa.
This is according to Willem Janse van Rensburg, a director at Cliffe Dekker Hofmeyr who says that it is unlikely that the UK and US will ignore the media hype and regulatory findings surrounding corruption in South Africa – especially those cases which involve electronic and banking systems with international connections.
“This is especially likely given the recent developments in global anti-bribery and corruption (ABC) and anti-money laundering (AML),” said van Rensburg. “Chances are that South Africa might go through the same experience as Brazil.”
In January 2017, Brazil topped the list of corporate investigations by the United States’ department of justice for purposes of enforcing the Foreign Corrupt Practices Act (FCPA), with 19 investigations.
Eight months later, Brazil increased its global lead by slotting 38 FCPA corporate investigations.
“It has become a feeding frenzy with some of the biggest corruption-related fines in the 40-year history of the FCPA levied on global companies,” said van Rensburg.
One of the biggest reason for the increase in cases was Odebrecht SA – a construction company that has constructed a ‘graft machine’ by creating fake companies; rigging contracts; using secret bank accounts to pay fake invoices submitted by fake customers; meddling in the affairs of sovereign nations; bankrolling political campaigns; using black market bankers and lawyers doing paperwork for shell companies; and drafting fake agreements to back up bribe money.
“It was described as a family empire built on bribery and corruption,” said van Rensburg.
In January 2014 Brazil enacted what became known as the ‘Clean Company Act’: the country’s first anti-bribery statute providing for corporate liability, huge fines and disgorgement.
After being in effect for three years, the FCPA investigation count then increased from 19 to 38.
“The wheels of justice turn slowly, but surely,” said van Rensburg. “It is clear that the US is not going to tolerate any US company, or foreign entities using US systems, operating corruptly in Brazil.”
According to van Rensburg, even fleeting contact with US territory may constitute a sufficient nexus to give the US territorial jurisdiction over foreign entities and individuals for conduct that occurred outside the US.
This includes wire transfers through correspondent bank accounts in the US as part of a bribery scheme, which may be sufficient to satisfy territorial jurisdiction.
“This means that territorial jurisdiction could be based solely on the transmission or storage of e-mail on servers in the US,” he said.
According to van Rensburg, the UK followed in the United States’ footsteps when their courts approved the deferred prosecution agreement (DFA) entered into between the UK Serious Fraud Office (SFO) and Rolls Royce.
“The UK’s SFO has furthermore increased its focus of enforcement against individuals, which will also play a huge role in the global anti-corruption efforts if CEOs are willing to risk the fine,” said van Rensburg.
“The UK has recognised that it is at significant risk from illicit wealth laundered by corrupt individuals and it has taken a number of steps to help protect the UK from illicit wealth.”
Citing the daily reports of corruption and state capture in South Africa, van Rensburg said that there are clear parallels between Brazil and South Africa.
“The question is whether South Africa will end up in the same position as Brazil and face the invasive corporate investigations and concomitant plethora of collateral litigation which normally follow in the wake of a corruption meltdown,” he said.
“The media has already exposed several global companies affected by the South African alleged grand corruption, some of which have stock trading on the New York Stock Exchange and others with definite connections to the UK.
“The media further exposed the use of US dollars in some of the transactions and flow of funds through bank accounts overseas such as in Dubai. The emails further clearly illustrate the use of US based email and service providers, and funds channelled through US based correspondent banks.”
According to van Rensburg, while it may not be immediately clear what the future holds for the alleged corruption playing out in South Africa, one thing is certain – anti-corruption is a global concern with a very high priority, and countries like the US, UK, Germany, France and China are committed to uphold the anti-bribery standard on a global level.
“The ABC score boards clearly illustrate global companies will not escape the extra territorial reach of countries such as the US and UK, and if they fail to self-report, the company and its officials will face the consequences of the new ABC paradigm,” he said.