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Commercial Crime: How Does It Affect SAIPA And Its Members?

Monday, 03 September 2012   (0 Comments)
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Commercial Crime: How Does It Affect SAIPA And Its Members?

Commercial crime can be divided into many difference categories, but broadly speaking it refers to so-called ‘white-collar’ crime.Initially it was said that only individuals in higher socio-economic positions commit this crime – the point of the author, Edwin Sutherland writing in 1939, had been to show that individuals in this group also commit crime.This was later criticised,that most white-collar offenders were, in fact, middle-class people and that there is a further distinction to be made between crimes committed for personal gain and those committed on behalf of an organisation.Sutherland’s work did, however, lead to various debates and classification of commercial crimes.

One need only open the day’s newspaper to find a disturbingly long list of articles about, specifically, commercial crime.These crimes are non-violent but result in the loss of or damage to any asset, financial consideration, or other corporeal (physical) thing.In terms of the United Nations Declaration of Basic Principles of Justice for Victims of Crime and Abuse of Power (A/res/40/34 adopted by the General Assembly in 1985) a person may be considered a victim regardless of whether the perpetrator is identified, apprehended, prosecuted or convicted, and regardless of the familial relationship between perpetrator and the victim.

In the Annual Report of the South African Police Service of 2010/2011, as it relates to commercial crime, it is reported that a total of 88 388 cases were received for investigation which is a 58.2% increase since 2003/2004.Many of these crimes had a direct financial impact for the victims, while the effects of other crimes were less perceptible.

Investigating these crimes is a complex matter. In many cases, the victim and perpetrator are removed and, in some cases, the victim may not even be aware of the fact that he or she is a victim (e.g.where a crime is committed against a company).These losses are often written off and the prices of products and services adjusted in order to compensate.The victims may be consumers, employees and shareholders.If the losses are large enough, the company may be liquidated, which results in an almost incalculable loss of jobs and income (including future and reputational losses).

When examining victims, one must also consider how accessible a victim is to be victimised. For example, a person who is financially illiterate (and who might well be highly educated otherwise) is less likely to detect an element of criminality in the perpetrator. It may be an unscrupulous financial advisor supposedly acting in the client’s best interest whilst the reality is quite different, or a large corporate offering insurance on its merchandise without a FAIS mandated ‘free-choice’ (i.e. to unfairly downplay one product in favour of another or not explaining the policy wording in plain and understandable language, etc.).A whole host of other, seemingly minor abuses of power and knowledge quickly add up and come to mind.

 In SAIPA’s Legal and Ethics division we are confronted on a regular basis with alleged fraudulent activity and/or forgery and uttering that has allegedly been perpetrated by our members.Very recently we had a case the merits of which were that annual financial statements were supposedly signed by an accountant.The accountant in question,however, denies that he signed the particular financial statements.If this was proven to be correct, in a criminal court the perpetrator would be convicted of forgery and uttering. Of course, the state would have to prove that actual loss was suffered by the victim or at least that there was a potential loss. In this case the complainant’s application for grants (the company in question being an Non Profit Organisation and therefore largely dependent on grants) was turned down due to the forged signature that was appended to the financial statements. The alleged forgery was uncovered in the process of a grant application.

Fighting back
In the work of Sangweni and Balia (1999:3) the authors suggest five approaches which can be followed to prevent white-collar crimes:
•The Hard Option: adopting a zero-tolerance attitude and harsher sentences for offenders.The Prevention and Combating of Corrupt Activities Act (12 of 2004), in section 34, places a duty on any person in authority to report specified commercial crimes to the police. This creates a situation where victims can fight back against persons who are aware of crime taking place and don’t do anything about it.
•The Unitary Option: this option involves establishing a single,independent anti-corruption agency with sweeping powers to track down and prosecute any citizen guilty of involvement in such crimes.In South Africa the structures currently in place are regarded by some as too fragmented to be effective. These agencies include: The National Prosecuting Authority, the Asset Forfeiture Unit, the South African Revenue Services, the National Anti-Corruption Forum, the Independent Complaints Directorate,the South African Police Service Commercial Crime Unit, the Office of the Public Protector, the National Intelligence Agency and the Office of the Auditor General.
•The Auditorial Option: implementing stringent and strict financial management and is designed to work as a medium- to long- term solution.
•The Managerial Option: or the engineering of management to deal with instances of corruption by designing and implementing control measures that increase the risk of detection and decrease the opportunities to commit commercial crime.
•The Soft Option: establishing strong ethical behaviour in the workplace coupled with an enforceable code of conduct that is designed to create a framework for excellence and to make the corrupt feel uncomfortable.

Proactive Measures

Ramaite (in Sangweni and Balia, 1999:170) is of the opinion that good governance is the antidote to corruption. Indoctrinating officials, employees, judicial officers and other role-players with the importance of good governance will sensitise them to and maximise the quality of good governance or administration of both public and private affairs.Other proactive measures may include information sharing (e.g.a company who discovers and successfully eradicates corruption within its ranks could empower other companies to do the same,if the knowledge is shared. It will also restore the credibility of the company in the view of the public.) and training of role-players (e.g.employees) to deal with corruption and mitigate risks within the scope of their employment and within the scope of the business as a whole.

Reactive measures

To prevent any crime is always of upmost importance.However,once it takes place there must be a strategy in place to deal with the repercussions.Employees should be made aware of the consequences of their misconduct, and employment contracts (as well as disciplinary codes) should make provision for the suspension or dismissal of persons involved in crime.However, an individual’s rights must not be disregarded and, therefore, an effective balance must be struck.Adopting and pursuing a zero-tolerance approach should be vigorously pursued. To be frank, take no prisoners and have no mercy.Offenders should be prosecuted civilly and criminally.In terms of section 300 of the Criminal Procedure Act (51 of1977), any victim of an offence involving the loss of money or property is entitled to apply to the court, through the prosecutor, for an order to compensation against the convicted person. This amount will differ depending on the jurisdiction of the court.


We are all victims of commercial crime; the distinction is merely a matter of degree.Most, if not all, of these crimes are committed by combinations of deception, abuse of power and greed.South Africa at large is affected by ‘white collar’ crime as anywhere else.Good Corporate Governance should prevail in all sectors of business be it a multi-national or an SMME.Every individual and business must do their bit in preventing and exposing ‘white collar’ crime.It is the right thing to do.

"Will you join in our crusade? Who will be strong and stand with me?Beyond the barricade is there a world you long to see?” - Les Miserables

Acknowledments: Roberre van Zyl, SAIPA]

Source: By Heide van der Westhuizen, Legal and Ethics Division, SAIPA (Tax Professional)



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