Moneymaking schemes such as prostitution, drug dealing, fraud, corruption, pyramid schemes and the sale of counterfeit goods have been around for years. The taxing of these transactions/schemes has become a contentious issue. It has recently been reported in the press that SARS has lodged a claim for R183 million in income taxes against the estate of the slain mining magnate, Brett Kebble, in respect of the R2 billion allegedly stolen by him from the mining companies of which he was a director.4 It is further reported that the Master of the High Court has rejected the claim on the grounds that the amounts on which SARS sought to levy tax constituted money stolen by Kebble, and that stolen money is not subject to income tax. It has been reported that SARS is to take the Master’s decision in this regard on review.5 The Kebble case raises an interesting and unresolved tax issue and, in view of the large sum at stake, it may be a case that will go all the way to the Supreme Court of Appeal and bring long-overdue certainty to the law. The Income Tax Act No. 58 of 1962 (the Act) is of no assistance in determining the issue. Section 23(o) states that payments that are illegal in terms of Chapter 2 of the Prevention and Combating of Corrupt Activities Act No. 12 of 2004 or that constitute a fine or penalty for any “unlawful activity carried out in the Republic or in any other country if that activity.

The prevalence of the money laundering crime has prompted the introduction of customer due diligence (CDD) measures. CDD measures facilitate the prevention of money laundering and promote the introduction of certain detective skills. Several international institutions champion the introduction of the detective skills in general and the performing of CDD measures in particular. These institutions acknowledge the cumbersome (administrative and financial) effects of introducing the detective skills and the performing of CDD measures. However, these institutions concedes that the aforementioned burden can be alleviated or lessened if the institutions that are responsible for performing CDD measures, i.e. Accountable Institutions (AIs), can exchange and rely on third parties’ (CDD) data. The exchange and reliance on third parties’ data must however consider the divergent threats or risks that might be associated with the data or third parties. The view regarding the exchanging and relying on third parties’ data is shared by, amongst others, the FATF and the UK. However, South Africa appears to be lagging behind in this respect. In other words, the South African FICA and FICA Regulations omit to encapsulate express and lucid provisions permitting the exchanging and relying on third parties’ data for purposes of performing CDD measures. The aforementioned omission, it is argued, creates a legal vacuum in the South African scheme of anti-money laundering. In other words, the aforesaid vacuum lives the South African AIs in a state of doubt regarding the manner and extent of exchanging and relying on third parties’ data. However, the aforesaid vacuum, this study concedes, can be rectified by introduction provisions that are line with the draft Regulation 5A and 5B that are proposed in chapter seven of this study. / Jurisprudence / LL. M.

The prevalence of the money laundering crime has prompted the introduction of customer due diligence (CDD) measures. CDD measures facilitate the prevention of money laundering and promote the introduction of certain detective skills. Several international institutions champion the introduction of the detective skills in general and the performing of CDD measures in particular. These institutions acknowledge the cumbersome (administrative and financial) effects of introducing the detective skills and the performing of CDD measures. However, these institutions concedes that the aforementioned burden can be alleviated or lessened if the institutions that are responsible for performing CDD measures, i.e. Accountable Institutions (AIs), can exchange and rely on third parties’ (CDD) data. The exchange and reliance on third parties’ data must however consider the divergent threats or risks that might be associated with the data or third parties. The view regarding the exchanging and relying on third parties’ data is shared by, amongst others, the FATF and the UK. However, South Africa appears to be lagging behind in this respect. In other words, the South African FICA and FICA Regulations omit to encapsulate express and lucid provisions permitting the exchanging and relying on third parties’ data for purposes of performing CDD measures. The aforementioned omission, it is argued, creates a legal vacuum in the South African scheme of anti-money laundering. In other words, the aforesaid vacuum lives the South African AIs in a state of doubt regarding the manner and extent of exchanging and relying on third parties’ data. However, the aforesaid vacuum, this study concedes, can be rectified by introduction provisions that are line with the draft Regulation 5A and 5B that are proposed in chapter seven of this study. / Jurisprudence / LL. M.

Income tax in South Africa is levied in terms of the Income Tax Act, 58 of 1962 (the South African Income Tax Act) on taxable income, which by definition, is arrived at by deducting from ''gross income" receipts and accruals that are exempt from tax as well as deductions and allowances provided for in the Act. The South African Income Tax Act provides no guidance with regard to the taxation of income and expenditure from illegal activities. In this mini thesis, case law and legislation is reviewed in an attempt to provide clarity on the tax consequences of income and expenses arising from illegal activities. An overview is provided of the taxation of income and expenditure in respect of illegal activities in the United States of America, Australia and New Zealand. Similarities are found between the American, Australian, New Zealand and South African tax regimes in relation to the taxation of income earned from illegal activities, but there appears to be more certainty in America, Australia and New Zealand with regard to the deduction of expenses arising from illegal activities. In South Africa, taxpayers earning income from ongoing illegal activities will, in principle, comply with the definition of “trade” as defined in section 1 of the South African Income Tax Act. However, this is contrary to the view of the South African Revenue Service that illegal activities do not meet the definition of “trade”, a viewpoint that may not hold if challenged in court. Recommendations are made for the amendment of the South African Income Tax Act to specifically provide for the inclusion in “gross income” of income from illegal activities and to prohibit the deduction of expenditure arising from illegal activities.

The aim of this paper is to research how advanced accounting software can be used by police detectives, financial risk specialists and forensic investigation specialists, who are responsible for the investigation and tracing of the reintegration of proceeds of crime, from underground banking into formal banking system (pro active and reactive money laundering investigation) with a view on criminal prosecution. The research started of by looking at the basic ways how proceeds of crime are smuggled before it is integrated into the formal banking system. In that context, the phenomenon of Underground banking was researched. Currency smuggling, Hawala currency transfer schemes and the way in which it is used to move proceeds of crime were discussed in detail. Thereafter Formal banking and the way in which proceeds of crime is reintegrated from underground banking structures into formal banking systems were discussed. The use of advanced accounting software to trace the point where proceeds of crime are reintegrated into formal banking were researched extensively. Accounting software and investigative techniques on how to trace financial transactions which might be tainted with proceeds of crime were discussed. Accounting software which can be used on office computers such as laptops were discussed and more advanced automated systems which can be used to trace proceeds of crime transactions in the formal banking systems were also discussed. In specific, the investigative techniques on how to use these systems as investigative tools were discussed in great detail. This research paper gives a truly unique perspective on the financial investigative and analytical angle on proceeds of crime and money laundering detection. / Criminal Justice / M.Tech. (Forensic Investigation)

It is a well-known fact that criminals derive an income from their illegal activities, live lavish lifestyles, flaunt their wealth for all to see and acquire luxury goods. It is also a well known fact that criminals living from the proceeds of crime do not want to not want to keep financial records of their transactions or illegitimate business for fear of being detected by the authorities and to escape being taxed. It is also a known fact that criminals do not declare income from criminal activities for income tax purposes to the revenue authorities for fear of the illegal origin of the income being made known to the investigating authorities and law enforcement. During the investigation of financial crimes, such as tax evasion and money laundering, it may be required that the amount or value of money, income or assets accrued by a subject is determined in order to determine for instance their liability to pay tax. This research project examines the Net Worth method as an indirect method to circumstantially quantify income during the investigation of financial crime. / Police Practice / M.Tech. (Forensic Investigation)

The opening of a bank account serves as the genesis of a bank customer relationship. It is imperative that the establishment of a bank customer relationship be regulated by law. Both the common law and statutory law regulate the admission of new clients to the realm of banking. It is a minimum requirement, in terms of both statutory and common law, that the identity of a prospective client who wishes to open a bank account must both be established and verified. This, the need to know one’s customer, is not only good law but common sense and an effective measure to prevent criminals from accessing the banking system. Parties who work together must know each other. The need to establish and verify the identity of a potential customer is commonly referred to as the Know Your Customer standards, alternatively the Customer Due Diligence framework. The Know Your Customer standards are neither unique to South Africa nor have their origins in South Africa. The Know Your Customer standards are international standards which the Financial Action Task Force and the Basel Committee on Banking Supervision have been advocating for quite some time. A confluence of the Recommendations of the Financial Action Task Force and the Basel Committee on Banking Supervision greatly influenced the birth of the Financial Intelligence Centre Act in South Africa. The Financial Intelligence Centre Act 38 of 2001 prescribes the steps that a bank has to take in order to establish and verify the identity of a potential client. It will be shown in this dissertation that the identification and verification regime established by the Financial Intelligence Centre Act 38 0f 2001 and the common law are not fool proof. This dissertation makes recommendations on how the current loopholes that exist in the law can be addressed. / Mercantile Law / LLM

Tax crimes, money laundering and other financial crimes threaten the strategic, political and economic interests of developed and developing countries. The problems encountered by the researcher, is the broad and vague meaning of financial crime compounded by the confusing and ill-considered use of the term by law- and policymakers, politicians, government agencies, agency officials and practitioners weakening effective communication about the phenomenon. The literature shows that given the complexity and multi-faceted nature of financial crime, combating financial crime in all its facets cannot be undertaken by investigative agencies acting in isolation. This study was undertaken with the aim to describe and systematically categorise financial crime and evaluate the prospect of using a Whole-of-Government approach as a framework to harness the capacity of the existing government agencies to combat financial crime more effectively. The research was underpinned by a pragmatic paradigm allowing the researcher to apply a qualitative research methodology using an exploratory and evaluation research design. A detailed review of the literature available nationally and internationally was conducted to establish a conceptual and practical understanding of the issues under investigation. An interview schedule with predetermined questions was developed, pre-tested and administered to participants who are active practitioners involved in combating financial crime in the primary government agencies responsible for combating financial crime based on a purposive sample. The data obtained from the literature and participants were analysed, interpreted and thematically listed according to the frequency with the aim of identifying and comparing similarities and differences between the data. The data was used to develop a system to categorise financial crime systematically based on descriptors used to describe the meaning and application of the term financial crime and to propose practical methods practises and models to combat financial crime more effectively. This research indicates that financial crime can be systematically categorised according to descriptors of the unlawful conduct and that the whole of government approach is a viable approach to combat financial crime more effectively according to the available models for arranging Whole-of-Government work. / Police Science / D.Litt. et Phil. (Police Science)

The aim of this paper is to research how advanced accounting software can be used by police detectives, financial risk specialists and forensic investigation specialists, who are responsible for the investigation and tracing of the reintegration of proceeds of crime, from underground banking into formal banking system (pro active and reactive money laundering investigation) with a view on criminal prosecution. The research started of by looking at the basic ways how proceeds of crime are smuggled before it is integrated into the formal banking system. In that context, the phenomenon of Underground banking was researched. Currency smuggling, Hawala currency transfer schemes and the way in which it is used to move proceeds of crime were discussed in detail. Thereafter Formal banking and the way in which proceeds of crime is reintegrated from underground banking structures into formal banking systems were discussed. The use of advanced accounting software to trace the point where proceeds of crime are reintegrated into formal banking were researched extensively. Accounting software and investigative techniques on how to trace financial transactions which might be tainted with proceeds of crime were discussed. Accounting software which can be used on office computers such as laptops were discussed and more advanced automated systems which can be used to trace proceeds of crime transactions in the formal banking systems were also discussed. In specific, the investigative techniques on how to use these systems as investigative tools were discussed in great detail. This research paper gives a truly unique perspective on the financial investigative and analytical angle on proceeds of crime and money laundering detection. / Criminal Justice / M.Tech. (Forensic Investigation)

It is a well-known fact that criminals derive an income from their illegal activities, live lavish lifestyles, flaunt their wealth for all to see and acquire luxury goods. It is also a well known fact that criminals living from the proceeds of crime do not want to not want to keep financial records of their transactions or illegitimate business for fear of being detected by the authorities and to escape being taxed. It is also a known fact that criminals do not declare income from criminal activities for income tax purposes to the revenue authorities for fear of the illegal origin of the income being made known to the investigating authorities and law enforcement. During the investigation of financial crimes, such as tax evasion and money laundering, it may be required that the amount or value of money, income or assets accrued by a subject is determined in order to determine for instance their liability to pay tax. This research project examines the Net Worth method as an indirect method to circumstantially quantify income during the investigation of financial crime. / Police Practice / M.Tech. (Forensic Investigation)