Commercial crime is growing faster and frauds are more complex and involve larger sums than ever before. The white collar crimes of fraud, corruption and money laundering in both the private and public sectors are costing South Africa billions of Rand a year. There is also growing public outrage over corrupt officials and opportunistic fraudsters who appear to be “getting away with it”."
The investigation of commercial crimes such as fraud, corruption and money laundering requires specialised forensic legal skills and an understanding of the criminal justice system. There is an increasing body of law focused on dealing with the problem of economic crime and more recently the establishment of a Commercial Crimes Unit and Court, which focus on the investigation and prosecution of such crimes, with branches in Johannesburg, Pretoria and Durban.
There is no denying that auditors and accountants have absorbed a large share of the forensics market. However, there are
investigations that in addition to investigative skills, require significant specialised legal knowledge, to commence understanding the issue. Furthermore, research shows that financial statement fraud constitutes a very small percentage of all frauds committed. Skilled forensic investigations is a product of both a detailed knowledge of the industry and the legislative framework in which the investigation must take place, as well as focused efficient information gathering techniques. The White Collar Crime team has a wealth of specialised knowledge of areas such as financial services, banking, employment law etc, that form the foundation of specialised focused investigations.
OUR APPROACH
Our approach to forensic investigations aims to reduce, control and prevent business related or white-collar crime, such as fraud and false pretences, theft, breach of trust, offences against the Government, the corruption of public officials, the
insolvency process, securities fraud and counterfeiting. Our team comprises of legal experts who are particularly
knowledgeable and experienced in the applicable law of evidence and investigative legal procedures, and possess the
necessary interrogation and world class litigation skills not only to investigate but also to institute civil, disciplinary or
criminal proceedings and to recover whatever losses may have been sustained. Our investigations are conducted with the ultimate goal of not only giving the client a choice of instituting disciplinary, civil or criminal action at the end of the investigation, but also to have assembled all the admissible evidence that will be required for a successful prosecution at a disciplinary hearing, criminal trial or civil action.
With access to the vast resources of a broader firm, our multidisciplinary team can be enlarged to incorporate whatever
capacity is required, depending on the matter at hand. We also have access to the best auditors, accountants, investigators
and IT specialists, who can supplement our team, whenever required to do so.
FORENSIC AND ETHICS SERVICES
The primary responsibility for the prevention and detection of fraud rests with those charged with the governance and with the management of an entity.
Recent amendments to South African Auditing Standards, more specifically SAAS 240R (Fraud and Error), places a very high onus on auditors to be more proactive in fraud detection whilst performing audits. SAAS 240(R) provides that the auditor should obtain written representations from management that inter alia, it acknowledges its responsibility for the design and implementation of internal controls to prevent and detect fraud.
The statement on Internal Auditing Standard No 3 expands on the responsibilities of internal auditors with respect to fraud.
The Internal auditor is responsible for determining whether due actions have been taken by management to prevent and
combat fraud and whether they were carried out efficiently and effectively. Internal Auditing Standard 2130 A1 provides that the internal audit activity should evaluate the design, implementation and effectiveness of the organisation’s ethics related objectives, programs and activities. In response to the needs and responsibilities of key players in any organisation, Bowman Gilfillan’s White Collar Crime practice area focuses on 9 main areas:
FRAUD RISK ANALYSIS
Fraud Risk Assessments represent the largest single task in proactive fraud prevention. The fraud risk identification process
includes, but is not limited to, structural risks, systems risks and personnel risks of an organisation. This involves the
investigation and making of recommendations in relation to:
- The absence of controls relevant to a particular process and related procedures.
- Insufficient controls relevant to such processes and/or procedures.
- Non-compliance with existing controls.
- Adequacy and efficiency of controls.
- Designing of specific internal controls that may be introduced by an entity to prevent common types of fraud.
FRAUD PREVENTION AND DETECTION
Our team has developed comprehensive Fraud Prevention Strategies for clients which take into account, existing fraud
prevention initiatives in place, existing frauds faced by the organisation, and the mechanisms, procedures and initiatives
necessary to manage these fraud risks. The Fraud Prevention Plan sets out mechanisms to prevent, detect, investigate and prosecute fraud to the full extent of the law. The Fraud Prevention Plan is based on 6 focus areas:
- Commitment by Top Management, which includes commitment to Zero Tolerance, signing of the fraud policy statement and circulating the message to all staff members.
- The Prevention Policy, which includes staff sensitization and participation in fraud prevention, creating a fraud hotline, rewards for whistle blowers and internal and external publication.
- Managing Human Resources.
- Managing the Fraud Risk, which includes fraud risk assessments and grading of positions, surprise audit and spot checks, fraud prevention training, industrial and external fraud risks and a fraud response plan, to guide the fraud response team on the processes of investigations, collecting and safeguarding of evidence, report writing and the civil recovery of losses and/or criminal or disciplinary action.
- Managing Procurement Risks.
- Addressing Information Technology Risks, which includes fraud detection through data mining, securing cyberspace by means of firewalls and mail security, securing financial and other electronic systems and IT policies, procedures and processes.
FORENSIC AUDIT AND INVESTIGATION
Services that involve investigative and auditing work, relating to specific allegations of serious economic crime and related
misconduct are as follows:
- General fraud investigations.
- Breach of contract investigations.
- Due diligence investigations, having a forensic focus.
- Liquidation support and asset tracing.
- Prosecution of disciplinary matters.
As part of our approach, we actively manage the capacity building and transfer of related project skills to client personnel.
PROCUREMENT SERVICES AND BBBEE ASSESSMENTS
Procurement remains the area where most fraud and corruption occurs. Inefficient controls, inadequate contracts and questionable procurement practices, policies and procedures compound the problem and are often serious enough to cause organisations to experience financial difficulties. A comprehensive participative strategy aimed at minimizing losses through procurement is provided to clients in all sectors, which includes:
- Conducting of reviews to ensure that tender and
procurement processes meet the latest legal and corporate governance requirements.
- Providing opinions on the tender process in terms of transparency, equity, cost effectiveness, competitiveness and value for money.
- Determining whether the entity has followed applicable procedures and policies in awarding tenders.
- Reviewing potential conflicts of interest, in respect of tenders and applications.
- Performing assessments on the BBBEE status of organisations that have been awarded contracts.
- Providing recommendations, if required, on improvements or changes to the tender process.
- Supplier and trading partner vetting.
- Review of supplier databases.
- Risk listing of suppliers.
HUMAN RESOURCES AUDITS
Human Resources audits include:
- Staff vetting.
- Qualifications audits.
- Service contracts tailored to fraud prevention.
- Registers of interests and gifts.
- Restraints of trade and confidentially agreements.
FRAUD REPORTING
Forensic investigation reports are structured to contain not only the factual circumstances relating to matters investigated,
but also include recommendations relating to the risk and control environment of the organisation. The legal aspects relating to any matter investigated are also dealt with in the form of legal opinions, which is an added dimension to reporting by accounting firms. Reports are prepared in a format where evidence is presented in a professional and concise manner for purposes of internal disciplinary hearings, criminal and civil proceedings. Reports are supported by evidentiary material and do not require further legal input.
We also advise and assist clients with their own reporting obligations in terms of relevant legislation, such as the Prevention and Combating of Corrupt Activities Act, 2004, the Financial Intelligence Centre Act, 2001 and the new Auditing
Profession Act.
CIVIL LOSS RECOVERY, CRIMINAL ACTION AND EMPLOYMENT LAW
SERVICES
Bowman Gilfillan, which is generally regarded as one of the premier law firms in South Africa, is in a position to offer clients top quality legal advice on civil recoveries, disciplinary and/or criminal action which may be required.
Our Litigation Department, Employment Law Department and Insolvency Department, work closely with the White Collar
Crime practise area to assist clients with civil loss recovery, the institution of legal processes aimed at freezing assets,
placing assets under curatorship, repatriating funds etc, as well as disciplinary proceedings.
FRAUD TRAINING
The single most cost effective and long term investment any organisation can make is to empower its people with knowledge and understanding with regard to the fight against economic crime.
A comprehensive training package has been designed to assist clients to empower their staff to highlight the risk of fraud and corruption in the entity, teach employees to recognise fraud in its infancy and to guide the internal fraud prevention team to utilise optimum processes in combating and responding to fraud. Training can take the form of lectures, workshops, presentations and seminars. Training material is provided to ensure a detailed understanding of the concept of fraud and fraud investigation.
ETHICS LINE
The ethics services provided by us include:
- Evaluation of the design, implementation and effectiveness of the organisation’s ethics related objectives, programs
and activities.
- Drafting of Codes of Conduct and Ethics.
- Designing of Ethics strategies and interventions.
RECENT FORENSIC ASSIGNMENTS PERFORMED
Selected examples of prominent matters in which the firm and/or team members have been involved include:
- An investigation into alleged dishonesty and corruption on the part of the trustees of a prominent medical aid
scheme, which report was submitted to the Registrar of Medical Schemes.
- Performing an inspection into undue payments made to senior management at a medical scheme, on behalf of the Registrar of Medical Schemes.
- An investigation into breaches of the Companies Act by a senior executive of a client and assisting in preparing
the charges for the public prosecutor.
- Assisting a client investigate and prosecute a theft ring involving senior members of management as well as members of the security company supposedly guarding the clients assets.
- Assisting an overseas client who was the victim of a fraud scheme similar to the notorious “419” schemes, in terms
of which the client was threatened with false criminal proceedings and investigations in South Africa.
- Assisting a bank which was utilised as a vehicle for a fraud perpetrated by a high profile client.
- Advising a client on the recovery of monies misappropriated by its auditor.
- An investigation into allegations of procurement fraud at a major parastatal. We also assisted with the disciplinary actions against those involved and are currently assisting the client to recover the monies involved.
- Drafting of fraud prevention plans for 5 government departments in the Eastern Cape.
- Conducting an investigation into large amounts written off from the assets register of a municipality.
- Conducting a forensic investigation into the payment of housing subsidies.
- Conducting various special investigations on behalf of the Auditor-General.
- Performing a forensic investigation into procurement related issues relating to fleet management.
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