Fraud and corruption are just two of the many threats to financial security and economic growth. Efforts to curb their effects have evolved the need for regulatory compliance. Below, we’ll take a closer look at the rise and need for effective risk management and regulatory compliance in a changing South African economy. 

Read more: Debit order fraud prevention.

A look at fraud and corruption in South Africa 

With a tightening stranglehold on South Africa, fraud and corruption are more entrenched in our daily lives than ever before. This, unfortunately, isn’t a shocking statement anymore.  You don’t have to look hard to find examples of governmental and private sector failures to foresee, address, and resolve high-level fraud and corruption cases.  

Looking back, South Africa first became acquainted with the terrible duo in 1996, courtesy of the Sarafina 2 debacle. Little did we know that one simple payment to playwright Mbongeni Ngema all those years ago would be the first of more than 30 major fraud and corruption scandals. Since then, many headlines have revealed almost unbelievable findings. Recent memories bring up thoughts of the R515-million PPE contract awarded to Red Roses Africa by the South African Police Service in 2021.  

The list, sadly, goes on. 

South Africa’s greylisting and what it means for businesses 

As a result of continued rampant corruption, South Africa dipped to below average, losing two more points in the 2023 Corruption Perceptions Index (CPI) curated by Transparency International. This is on par with Burkina Faso, Vietnam, and Kosovo. In addition to this lowered ranking, the South African economy suffered another blow in 2023. Global crime watchdog, the Financial Action Task Force (FATF), officially greylisted the country for non-compliance with international standards. These standards all address the prevention of money laundering, terrorist financing, and proliferation. The FATF concluded that the current legal framework in South Africa could not address the scope of risks within its mandate. Contextually, this is only the third time a G20 country has been placed on this list. The various remedial actions taken to date highlights the importance of more stringent compliance needs and regulations across all sectors.  

South Africa’s greylisting, however, is far more telling of problems faced by local businesses due to a changing landscape rife with fraud and corruption. Highlighting how crucial it is to minimise risk; businesses simply cannot afford to engage with companies unaligned with in-house risk mitigation and compliance requirements.  It does remain continuously difficult to look to governmental departments and policies in this regard. However, when looking for a balance between idealised policies and regulatory requirements, local businesses have to work with what they’re given, which isn’t always much. Taking things further, local businesses are expected to operate within this ecosystem. However, no one can deny a simple truth—the core of mutually beneficial financial growth rests on trust. The need for trust and the prevalence of corruption creates quite a paradox. 

 Because of this trust, transparent compliance is expected and non-negotiable in the current climate. When businesses commit to this foundational aspect of finance, both upstream and downstream channels reap the benefit.  

Getting a grip on compliance and risk 

Regulatory compliance can seem intimidating and, at the best of times, potentially confusing from a distance. This is in part because different industries have different regulations. Although intricate, these distinct regulatory policies and requirements are specific to their industries and in place to ensure adherence to applicable laws, rules, codes, and standards. Aimed at streamlining the cultivation of a compliance framework, businesses must functionally operate within their industry scope. 

That said, there are instances where regulatory compliance affects all industries or form part of general legislation. Various examples exist, with some prominent South African pieces of legislation being the Financial Intelligence Centre Act (FICA), the Income Tax Act, the Occupational Health and Safety Act and the Protection of Personal Information Act (POPIA). 

These regulatory requirements, and many others, must be adhered to, as regulators value compliance status highly. 

How to improve regulatory compliance and risk management 

What can local businesses do to ensure compliance while reducing risk when all is said and done?  

• An easy first step is to consider regulators for a minute. From their side, the goal is smooth unilateral compliance, which results in easily accessible information and guidance on their respective websites. 

• Businesses can invest in client and supplier screening. This can include automated screenings for sanctions, employees, suppliers, and client databases. In addition, risk screening of clients is also a valuable asset. Remember that this is a paid service, and while potentially expensive for smaller businesses, the benefit of effective risk aversion is near-priceless. 

• Partner with a trusted financial services provider, like Netcash, to handle payments. Our payment management solutions include risk reports, bank account verification, business linked to consumers, consumer credit checks, CIPC business reports, and mini company reports. 

• At the ground level, businesses that attend to and prioritise staff education naturally ease their way to compliance. This involves training to ensure staff are aware of legislative requirements and changes and enable them to catch potential fraudulent activity.  

Sidenote: Ensure that employees can distinguish between the beneficial ownership and the directors of your business. 

• An alternative is to receive free government gazettes, which makes it easy to stay updated with industry changes. Additionally, the Green Gazette send out monthly alerts about changes and can also be searched for any other gazetted notices for R129 a month. 

The bottom line | Regulatory compliance and risk management with Netcash 

In theory, compliance with industry regulations is a learned skill, and practical application can be daunting. Businesses that partner with Netcash can rely on the highest levels of compliance. Netcash adheres to the same stringent regulations placed on banks and, as such, requires optimal compliance from clients. 

Our duty is to keep clients up to date with changes in the regulatory space and to inform them about potential risks. Netcash also provides advice on how to spot fraud and corruption and ways to address it.