Banks asked to join war against fraud

By FRANK SENGE KOLMA

 

PAYMENTS for infrastructure, compensation, feasibility studies and out of court settlements have been identified as the conduits by which the most fraud is committed against the state, The National reports.

And these types of payments will now be queued by banks as high-risk and be put through the most stringent due diligence procedures before being cleared.

Those who regularly bring these kinds of payments to banks will be placed on a high risk watch list and the information be shared be between banks, the fraud squad and relevant stakeholders.

These are part of due diligence guideline issued by the Police Fraud Squad's financial intelligence unit under the proceeds of crime act in relation to government payments.

Payments above a certain threshold will incur the attention of banks which will then apply the due diligence guideline. No threshold figure is mentioned in the guideline.

Compensation payments by the state to various parties have come under the special attention.

"Fraudulent payments obtained through the compensation payment process have become so frequent that they do not generate the level of suspicion that they deserve," the guideline states.

"It is evident that in recent times many claims have been paid in contravention of the statutory process, allowing illegitimate and improper claims and excess payments and excessive payouts to be legitimised."

The guideline states that the finance secretary, the attorney-general and the solicitor-general can only settle claims against the state and can only be drawn from legal sources and cannot be drawn from trust accounts or from votes other than the court order appropriation.

Votes that had attracted frequent abuses in the past include c207 miscellaneous, 460 account No. 2 and the 410 cash adjustment account, the guideline states.

When suspicious payments are detected the decision to accept a government cheque or payment must be made by at least two people in the bank.

"The signatures of the two must be recorded on the customer's file along with the acknowledgment that they agree with the assessment and a brief statement as to why," the guideline states.

"The decision must state whether the payment complies with the Public Finances Management Act or not.

"Cash dealers shall not clear any government cheque or payment above the threshold until these processes have been completed and a decision recorded about the legitimacy of the payment.

"This guideline applies to all payments of money from the public purse including trust accounts and all levels of government."

Companies that have a "long history of exemplary conduct in provision of goods and services to the government" will be placed on a low-risk list and clearance processes will be less stringent.

It is uncertain at this point whether or not the guideline is binding upon all cash dealers or whether or not banks have agreed to perform the due diligence asked of them.