Money laundering: The wash and spin of looting

Money laundering, tax evasion and the clever concealment of wealth have become a pastime of the rich and notorious in South Africa.

According to forensic investigator Chad Thomas of IRS Forensic Investigations the methods used to hide wealth are increasingly sophisticated, yet sometimes frighteningly simple.

Laundry lists include everything from luxury cars, to property purchases, said Thomas. “What we’re seeing is people living lavish lives, but on paper, they own nothing,” he said.

How to get away with money laundering

Assets like supercars or high-end properties are often purchased through juristic entities, such as trusts or companies.

“They leave the vehicles or properties under someone else’s name, often a nominee or a family member, so it’s difficult to trace the asset back to the person who is actually benefitting from it.”

Expensive cars are also bought and never taken home. Often dealers rent parking bays to customers who leave the vehicles on the showroom floor, hiding assets in plain sight.

Thomas said these practices are not limited to high-profile tenderpreneurs, whose wealth continues to dig deep into taxpayer pockets.

Many individuals involved in so-called white-collar crime, tax evasion, or illicit business dealings, employ the same tactics.

“Whether it’s government contracts, tax evasion schemes, or even proceeds from drug trafficking, the goal is the same: to enjoy the luxury without it coming back to haunt them,” Thomas said.

The use of special purpose vehicles, trusts, and companies have created a labyrinth of financial secrecy and hiding places, allowing for a life in the shadows, while driving Italian sports cars and residing in mansions – all with a healthy measure of deniability.

For many fun-loving criminals, the money they acquire is quickly funnelled into luxury goods and experiences, Thomas said.

“We’re talking about people spending hundreds of thousands of rands in nightclubs or writing off supercars only to buy new ones the following week.”

This culture of conspicuous consumption, fuelled by fraud, has become increasingly visible, with social media accounts often flaunting these lavish lifestyles. But it’s not just about showing off.

Thomas said some individuals use luxury assets as part of a broader money laundering scheme.

“You’ll see someone buy a high-end property or a collection of art.

“These assets can then be sold later and converted back into liquid funds. It’s all about hiding the money in plain sight.”

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Professionals make the scheme work

This is where enablers come in: professionals who benefit proportionally from the nasties that plague the country. These people help facilitate the concealment of shady wealth.

“You’ve got estate agents, car dealers, even jewellers, who play a role in this,” said Thomas.

“They know who they’re dealing with, but they provide the means to hide these assets anyway.

“And then there are accountants and bankers who show these individuals how to move their money offshore or into cryptocurrencies,” he added.

The mechanics behind money laundering can be incredibly sophisticated and next-level clever.

Thomas said criminal enterprises often set up legitimate-looking businesses to herd their illegal gains.

“They create companies, like a plant hire businesses that don’t actually operate beyond paper, but serve as a vehicle for laundering money.

“They produce fake invoices, move money between accounts and even send it offshore. It’s not uncommon for funds to end up in crypto or in accounts overseas, which makes it harder to trace.

“If you have ever wondered how a boutique selling big-ticket items, for example, but never has a soul in store makes money, you might find that on paper they entertain dozens of clients daily and do a roaring trade. Laundering can be that simple and sophisticated at the same time” said Thomas.

Even eateries make for great laundries. “You might see a restaurant claiming to serve hundreds of customers when it only seats 30.

It’s all about creating the appearance of a legitimate income stream.

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Invoice factory produces false invoices

“And no-one checks how many people are actually dining there.” Then there is the “invoice factory”. It’s a real thing,” said Thomas.

“This factory essentially produces false invoices for services or goods that were never delivered.

“This makes it appear as though the money has been spent on legitimate business operations when, in fact, it’s being funnelled into personal accounts or used to buy assets such as cars and properties.”

While many view white-collar crime as victimless, Thomas said its real-world impact is immense.

“Fraud isn’t just about people getting rich. It’s about communities not getting the roads, schools, or hospitals they desperately need.

“That money is meant to improve lives and, instead, it’s going towards sports cars and luxury holidays,” he said.

“The collusion between those awarding contracts and those receiving them is symbiotic. It’s a system built on mutual benefit, but at the expense of service delivery for South Africans – most often the poor,” he said.

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Oversight bodies are doing better

The SA Revenue Service (Sars), along with other financial oversight bodies, uses lifestyle audits and preservation orders to seize assets linked to criminal activities.

Thomas said cooperation between Sars, the Financial Intelligence Centre (FIC), and the Asset Forfeiture Unit has improved dramatically in recent years.

“By using financial intelligence and gathering evidence, they’ve been able to secure orders that preserve the assets, preventing them from being sold or transferred ,” he said.

FIC plays an important role in detecting money laundering.

“The tools they have at their disposal, combined with their ability to gather intelligence across multiple sectors, have been game-changers in the fight against white-collar crime.

“We’re seeing some progress, but for every individual caught, there are many more who continue to operate. “The challenge is massive and it will take years to undo the damage caused by these crimes,” Thomas said.