Introduction

In this special edition of Focus, we finish our look at anti-corruption legislation in Africa. In this fourth and final part of the series, we consider South Africa with the assistance of Bowman Gilfillan in Johannesburg. 

South Africa has comprehensive corruption and white collar crime legislation, and there is increasing foreign and domestic pressure to ensure the effective application and policing of that legislation.

OECD Recommendations

On 3 July 2010 the OECD published a report on the application of the OECD Convention in South Africa:

"As of the time of this report, there are no prosecutions for foreign bribery in South Africa, a matter that…  could be addressed if South Africa adopted a more proactive approach to the investigation and prosecution of this type of crime"

…The working group noted that, in spite of the long standing existence of corporate liability legislation, convictions or prosecutions of companies… appear to be rare.  The Group also indicated that it would follow-up on South Africa’s ability in practice to prosecute companies for foreign bribery acts…

…the legislative framework for combating bribery (in South Africa) is of a generally high standard…"

South Africa is required to implement the Working Group’s recommendations, and to report back on such implementation within 1 year (with a further formal written report within 2 years).

The South African government has been proactive in establishing various structures to deal with corruption and economic crime, including the Hawks, the South African Revenue Services, the Special Investigating Unit, the South African Police Services, the Public Protector, the Asset Forfeiture Unit and the newly established Anti Corruption Task Team ("ACTT").

In South Africa, corruption and other economic crime is governed by four main legislative enactments. These are the Prevention and Combating of Corrupt Activities Act 12 of 2004 ("the Corruption Act"), the Financial Intelligence Centre Act 38 of 2001 ("FICA"), the Prevention of Organised Crime Act 121 of 1998 ("POCA") and the Electronic Communications and Transactions Act 25 of 2002 ("ECTA").

Corruption Act

The Corruption Act creates a general offence of corruption under Section 3 and then numerous specific offences of corruption relating to public officers; foreign public officials; contracts with public and private bodies and procurement.  

The elements of the general offence of corruption are a) the giving of b) a gratification, which includes money, any donation, gift, reward, property or valuable consideration of any kind c) to a receiver d) for an unlawful purpose.

As with the UK Bribery Act, the South African Corruption Act applies equally to individuals and entities in the public and private sectors.

The Corruption Act has extraterritorial application and applies inter alia, to any act which takes place outside South Africa which affects or is intended to affect a public body, a business or any other person in South Africa.

Duty to Report

One of the unique features of the South African Corruption Act is the duty to report knowledge or even a suspicion of either the statutory offence of corruption or any of the common law economic crimes, failing which heavy penalties are imposed. No similar provision is found in the Foreign Corrupt Practices Act or the UK Bribery Act.

Section 34 of the Corruption Act provides that a duty to report an offence falls on any person who "holds a position of authority" in the organisation and who knows or ought reasonably to have known or suspected that any other person has committed an offence in terms of the Corruption Act ­ that being an act of corruption of any value, as well as theft; fraud; extortion; forgery or uttering a forged document involving an amount of R100 000 (approximately £10,000) or more.

The Corruption Act requires that a person who holds a position of authority must report his/her knowledge or suspicion to a police official and that any person who fails to comply with this requirement is guilty of an offence.

The obligation to report arises where there is actual knowledge of an offence, imputed knowledge, actual suspicion that an offence has been committed or imputed suspicion.

The reporting obligation in the Corruption Act was widely publicised in the beginning of 2010 with the laying of charges by one of the opposition parties, the Democratic Alliance, of Provincial Premier Paul Mashatile under this section. Mashatile had allegedly failed to report his knowledge of economic crimes including the forging of signatures, committed by Carl Niehaus who had held the position of Chief Executive at the Gauteng Economic Development Agency, before Niehaus resigned from this position in 2005. The effect of this was that the reporting provision was widely publicised, which brought it to the attention of the law enforcement agencies leading to an increased use of the provision.

Penalties

Persons found guilty of committing corruption under the Corruption Act may be sentenced to imprisonment for any period including for life or the payment of a fine of unlimited extent. In addition to the ordinary fine, the Court may also impose on the guilty party a second fine of five times the value of the gratification involved in the offence.

Failure to report an offence where there is an obligation to do so, is a further offence in terms of the Corruption Act. The penalty for the failure is a fine or imprisonment for a period not exceeding ten years depending on which Court hears the matter. The jurisdiction in which the matter is prosecuted will depend largely on the complexity of the case and the monetary value attributable to the offence which had to be reported.

The Court is also empowered to order that the details of a person or entity found guilty of corruption in relation to contracts or tendering be endorsed on a Register. This endorsement will apply to every enterprise to be established in the future by a person or entity entered on the Register.

The National Treasury is entitled to terminate any contract it has entered into with a person or entity endorsed on the Register and any person or entity so endorsed on the Register is obliged to disclose this fact in any future tender to an organ of state or public body.

Gifts and hospitality

The nature or value of a gift is irrelevant to its legality. The purpose for which the gift or gratification was given is determinative. No fixed monetary limit is stipulated in the Corruption Act. The context in which the gift or gratification is provided is only relevant in so far as it indicates motive.

Although the Corruption Act has no fixed monetary value for gifts and hospitality there is a plethora of other law that governs this. The Executive Ethics Code provides that Cabinet Ministers, Deputy Ministers and Members of Provincial Executive Committees, who are Ministers in the provincial cabinets must obtain permission of the President or relevant provincial Premier to accept gifts worth more than R1000 and must disclose gifts with a value of more than R350 or gifts from a single source which cumulatively exceed R350 in value during any calendar year. Members of Parliament must also report gifts worth R350 or more. Public servants should not accept a gift worth more than R350 without the prior approval of the Head of the Department. The offering of gifts to public servants is discouraged. Senior Managers in the Public Service may only in exceptional circumstances should gifts be accepted and they may accept unsolicited gifts or moderate acts of hospitality. Gifts or hospitality over the value of R350 must be declared.

Under the Public Service Code of Conduct, public servants must not use their official positions to obtain gifts or benefits for themselves during the performance of their official duties nor may they accept any gifts or benefits when offered, as these may be construed as bribes.

Governance Compliance Programmes

Entities doing business in South Africa should as a matter of course ensure that they have internal governance compliance programmes and action plans which ensure that they have adequate systems in place to prevent and avoid corruption and economic crime, which should take account of international best practice and importantly should be reflective of the local law. 

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Introduction

It is generally recognised by Nigerians and the international community that bribery and corruption have seriously impeded the growth and development of the country since independence. The paradox is that the Nigerian Legal System is replete with legislation for preventing and combating bribery and corrupt practices. Copious legislation on the subject have been criticised in some quarters as unduly repetitive.

Relevant Laws

The laws range from the Constitution of the Federal Republic of Nigeria, 1999 (as amended)  to several anti-bribery and corruption statutes including the Criminal Code and the Penal Code  with chapters on official and judicial corruption. More recently, in the year 2000, the National Assembly passed The Corrupt Practices and Other Related Offences Act 2000, into law, which established the "Independent Corrupt Practices and other Related Offences Commission" and makes receiving or offering a bribe, by or to, a public officer on account of anything already done or to be done in the discharge of his official duties a criminal offence punishable upon conviction by imprisonment for 7 (seven) years.

Perhaps, the most prominent anti-corruption legislation in Nigeria is the Economic and Financial Crimes Commission Act 2003  which established the Economic and Financial Crimes Commission (EFCC). The EFCC initially drove fear into the minds of Nigerians but under its pioneer Executive Chairman, Mr. Nuhu Ribadu, it was later criticised as being selective in the prosecution of the war against bribery and corruption. Government also sought to promote accountability in the public sector by enacting the Public Procurement Act in 2007 setting out processes and procedures for public procurement.

Forms of Bribery

Corruption in Nigeria takes different forms. Political corruption takes place when legislation and policy are tailored to benefit politicians and their friends directly or indirectly by manipulating decision-making processes, political institutions, rules of procedure or distorting the institutions of government. It could be bureaucratic or official where it is practised by public officials in government ministries or parastatals in the implementation of laws, regulations and policies. It may take the form of bribery, extortion, fraud, embezzlement, favouritism and nepotism. This kind of corruption is often encountered in daily interaction with public officials at all levels. Electoral corruption includes purchase of votes with money, bribing electoral officials and other forms of interference with the electoral process.

 ICPC

The ICPC seeks to combat bribery and corruption in three major ways: prevention, enforcement and education. The ICPC has powers to examine practices, systems and procedures of public entities. It also has the power to review, direct, instruct and assist officers or governmental agencies on ways of eliminating and or minimizing corruption by such officers or agencies. It has the mandate to educate and enlighten Nigerians on the untoward effects of bribery and create public awareness on the need to eliminate all forms of corruption and other related crimes. Citizens are also encouraged to report corrupt practices.

EFCC Prosecutors

The seemingly most effective and visible agency of all the anti-corruption agencies in Nigerian is perhaps the EFCC. The current Chairman of the EFCC, Mrs. Farida Waziri, recently stated that the nation has lost over $300billion to corrupt officials since independence. Following the recent turmoil in the Nigerian banking industry, the EFCC is prosecuting several Managing and Executive Directors of the affected banks and recovered cash and property worth over N170 billion  from one of them following a plea bargain. Billions of Naira were also recovered from a former Inspector-General of Police who was imprisoned for 6 (six) months. The EFCC has prosecuted several former State Governors and other public officials and recovered cash and property worth billions of Naira from some of them . Currently, the EFCC is prosecuting 55 cases against former bank CEOs, State Governors and senior government officials described as high profile.

Enforcement

The general perception remains that bribery and corruption probably constitute the most serious problems confronting Nigeria. In the 2010 Report published by Transparency International, Nigeria ranked a dismal 134, having a corruption perception index (or CPI) score of 2.4 points ahead of only Sierra Leone, Togo, Zimbabwe, Mauritania and Cameroon in Africa, out of 178 countries surveyed. In a 2009 Study conducted by the National Office of Statistics and the EFCC, 71% of respondents stated that corruption remains a problem in doing business in Nigeria. Many Nigerians are of the view that the problem is enforcement. The laws are there. Nigeria has enacted necessary legislation to combat the menace but the enforcement officials are poorly motivated and subject to political control by either the Attorney-General of the Federal in the case of the EFCC or the President in most other cases.

The Nigerian Police is notoriously under-funded and policemen are poorly paid. Customs officials, immigration officers, some judicial officers, civil servants, revenue officials and officers of government agencies and parastatals are generally perceived as very corrupt. For instance, there is an ongoing probe of corruption allegations made against the current Chief Justice of Nigeria by no less a person than the President of the Court of Appeal. Furthermore, several companies with headquarters or branch offices in the United States recently paid huge fines to the Governments of the United States and Nigeria for various offences particularly the bribery of Nigerian public officials. In recent times, based on the practice of plea bargains borrowed from the United States, the trend has been to seize identified assets of corrupt officials and hand them short sentences. In our view, this is not sufficient deterrent. Unfortunately, due to the absence of that strong deterrent, bribery and corruption appears to have taken over the fabric of our national life and appears to define the Nigerian persona in the international community.

Causes of Corruption

The causes of corruption include, amongst other things, great inequality in the distribution of wealth, the lure of easy oil money, the belief that political office permanently assures access to wealth and fame, perceived insincerity of government in the fight against corruption, the dilatory judicial processes and procedures plagued by endless interlocutories, degradation of general of moral values and the approbation of ill-gotten wealth by the populace. 

The EFCC claims that strict adherence to the rule of law (i.e. the need to follow proper procedures in investigating and prosecuting corruption cases) and the enforcement of fundamental rights by the court stalls investigation and convictions of culprits as most are granted bail immediately after their arrest thereby affording them the opportunity to interfere with investigations. The EFCC recently lamented the grant of ex-parte and perpetual injunctions by courts in favour of accused persons which ultimately undermines the fight against bribery and corruption and urged the establishment of special courts for bribery and corruption cases.

Conclusion

In the final analysis, the conclusion already reached by most Nigerians is that although there is copious legislation on the subject, there remains a serious gap in enforcement due to lack of political will.

Ben Unaegbunam, ACAS Law, Nigeria in conjunction with Trinity International LLP

The post Focus Special Edition – Corruption in Africa – Part 2 of 4: Nigeria appeared first on Trinity International LLP.

Anti-Corruption and Anti-Money Laundering Legislation in Kenya

Kenya has passed into legislation a number of statues that deal with corruption, economic crimes and money laundering.  At the same time, an attempt is being made to make the running of Government and State Corporations more transparent with the enactment of the PPDA and POEA: 

1. The Anti-Corruption and Economic Crimes Act (No. 3 of 2003) (commenced 2nd May, 2003) ("the ACECA").
2. The Public Officer Ethics Act, No. 4 of 2003 (commenced 2^nd May, 2003) ("the POEA").
3. The Public Procurement and Disposal Act, No. 3 of 2005 (commenced 1^st January, 2007) ("thePPDA").
4. Proceeds of Crime and Anti-Money Laundering Act, No.9 of 2009 (commenced 28^th June, 2009) ("the AML").

ACECA
The ACECA provides substantive definitions for corruption and economic crimes in sections 2, 39 to 44, 46 and 47. The ACECA caters for the appointment of Special Magistrates who have the jurisdiction to try corruption and economic crimes and related offences; and any conspiracy to commit or any attempt to commit or any abatement of any of the offences related to corruption and economic crimes.

KACC and Board

The ACECA also established the Kenya Anti-Corruption Commission (the "KACC") and the Kenya Anti-Corruption Advisory Board (the "Board"). The Board is made up of persons nominated by stakeholders.  It is unincorporated and is tasked with advising the KACC in matters relating to the exercise of its powers and discharge of its functions. The KACC’s functions are set out in section 7 of the ACECA and largely comprise of investigative powers and making recommendation for cases to be prosecuted. However, the auspices of actually prosecuting such cases falls under the Attorney-General.

Part IV of the ACECA provides the tools for investigations that the KACC can rely on. Under the said part IV the Director (who is the head of the KACC) can by notice in writing request a statement of a person’s property if that person is suspected of corruption or an economic crime. The Director may also request similar information from an "associate of a suspected person", or request for the production of records and property (note that this last request is provided for under section 28 of the ACECA and has been substantially watered down after a 2007 amendment). Failure to provide information to any of the above requests could upon conviction lead to a fine not exceeding Kenya Shillings three hundred thousand (approx. £2,000), or to imprisonment for a term not exceeding three years or both. The KACC also has the power to search premises, compel the surrender of travel documents and be able to arrest persons "to the like extent as police officers".  

Offences

The Offences under the ACECA are numerous and are listed under Part V which starts by defining an "agent" (a person who, in any capacity, and whether in the public or private sector, is employed by or acts for or on behalf of another person) and "principal" (a person, whether in the public or private sector, who employs an agent or for whom or on whose behalf an agent acts). Section 38 goes on to state that "for the purposes of this Part – (a) a Cabinet Minister shall be deemed to be an agent for both the Cabinet and the Government; and (b) the holder of a prescribed office or position shall be deemed to be an agent for the prescribed principal." Offences under this part include: Bribery of agents; secret inducement for advice; deceiving the principal; conflicts of interest; improper benefits to trustees for appointments; bid rigging; abuse of office and dealing with suspect property. For ease of reference section 48 has been reproduced in its entirety as it prescribes the penalties under part V.

"48.(1) A person convicted of an offence under this Part shall be liable to ­

(a)        a fine not exceeding one million shillings, or to imprisonment for a term not exceeding ten years, or to both; and

(b)        an additional mandatory fine if, as a result of the conduct that constituted the offence, the person received a quantifiable benefit or any other person suffered a quantifiable loss.

(2)        The mandatory fine referred to in subsection (1)(b) shall be determined as follows ­

(a)        the mandatory fine shall be equal to two times the amount of the benefit or loss described in subsection (1)(b);

(b)        if the conduct that constituted the offence resulted in both a benefit and loss described in subsection (1)(b), the mandatory fine shall be equal to two times the sum of the amount of the benefit and the amount of the loss.

The ACECA does not provide for any compliance or governance standards that a corporate entity may adopt, nonetheless as highlighted above it provides for the offences and corresponding penalties in relation to corruption and economic crimes.   

AML

The AML, inter alia, makes it a crime for someone who knows or ought to have known that property is or forms part of the proceeds of crime and enters into any agreement or engages in any arrangement or transaction with anyone in connection with that property. Further, any attempt to conceal or disguise the nature, source, location, disposition or movement of such property or enable or assist any person who committed or commits an offence, whether in Kenya or overseas to avoid prosecution or remove or diminish any property acquired directly or indirectly as a result of the commission of an offence is also considered a crime.

Implementation

The institutions charged with implementing the AML are the Financial Reporting Centre ("the FRC") which is a body with investigative powers and by analogy can be compared to Kenya Anti-Corruption Commission, the Anti-Money Laundering Advisory Board which shall advise the Director of the FRC and lastly the Assets Recovery Agency ("the Agency") which by its title is self explanatory and is considered a semi-autonomous body under the auspices of the Attorney-General.

The procedures for recovering and preserving the proceeds of crime are set out in parts VII and VIII of the Act. The mechanisms set out include confiscation orders, bankruptcy procedures and winding up of companies whose proceeds have to be realized. Part IX lays down the general provisions relating to preservation and forfeiture orders. Part X empowers the police to acquire the information and documents from any persons who may be suspected to have committed any offences under the Act. In addition, the Attorney General has the power under this part to seek help from foreign governments when investigating crime and money laundering and like-wise to assist foreign governments seeking similar information from Kenya.

Reporting Institutions

The AML provides for the obligations of a Reporting Institution defined in section 2 "to mean a financial institution and designated non-financial business and profession" with the following responsibilities provided in section 44 to 47:

A reporting institution shall monitor on an ongoing basis all complex, unusual, suspicious, large or other transaction as may be specified in the regulations, whether completed or not, and shall pay attention to all unusual patterns of transactions, to insignificant but periodic patterns of transactions that have no apparent economic or lawful purpose as stipulated in the regulations;

A reporting institution shall take reasonable measures to satisfy itself as to the true identity of any applicant seeking to enter into a business relationship with it or to carry out a transaction or series of transactions with it, by requiring the applicant to produce an official record reasonably capable of establishing the true identity of the applicant; the applicant in this case can be an individual, the government, or a body corporate. Further, a reporting institution shall undertake customer due diligence on the existing customers or clients;

A reporting institution shall establish and maintain records of all transactions, containing particulars sufficient to identify the name, physical and postal address and occupation (or where appropriate business or principal activity) of each person conducting the transaction or on whose behalf the transaction is being conducted, as well as the method used by the reporting institution to verify the identity of that person. Also the reporting institution shall ensure that its customer accounts are kept in the correct name of the account holder; and

A reporting institution shall establish and maintain internal controls and internal reporting procedures to identify persons to whom an employee is to report any information which comes to the employee’s attention in the course of employment and which gives rise to knowledge or suspicion by the employee that another person is engaged in money laundering.

The Act provides in Part II, sections 3 to 15 for the situations that would constitute an offence whereas section 16 provides for the punishments attached to the offences. These can be tabulated as follows:

Defences

We note that the UK Bribery Act will come into force on 1^st July, 2011 and accordingly the Ministry of Justice has released its guidance in relation to the said Act. The procedures in the guidance are: proportionate procedures, top-level commitment, risk assessment, due diligence, communication and monitoring and review, which, if followed would allow an entity to claim a defence that it implemented "adequate procedures" to prevent bribery. A similar defence structure does not exist in Kenya. Nonetheless, we would highlight that section 6 of the AML provides that, if a person is charged with committing an offence under section 3, 4, or 5, that person may raise as a defence the fact that he had reported a suspicion under the terms and conditions set forth in section 44 or, if the person is an employee of a reporting institution, that he has reported information pursuant to section 47(a). The ACECA provides at section 40 that it shall be no defence that the receiving, soliciting, giving or offering of any benefit is customary in any business, undertaking, office, profession or calling. Lastly, section 50 provides that it shall not be a defence that the act or omission was not within a person’s power or that the person did not intend to do the act or make the omission or that the act or omission did not occur. 

Walker Kontos in conjunction with Trinity International LLP.

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