The duty to report corrupt activities – the Legislature’s attempt to curb corruption

THE DUTY TO REPORT CORRUPT ACTIVITIES – THE LEGISLATURE’S ATTEMPT TO CURB CORRUPTION

In the current economic and political landscape, South Africans are frequently exposed to reports of corruption in both the private and public sectors. To rewrite the current narrative, it is imperative that whistle-blowers come forward and corrupt activities are reported, investigated, and prosecuted. The duty to report corruption extends beyond a mere moral obligation and is contained in The Prevention and Combatting of Corrupt Activities Act, 12 of 2004 (“PRECCA”).

PRECCA was adopted with the following main objectives –

(1) to strengthen measures designed to prevent and combat corruption;
(2) to codify the offence of corruption and other offences related to corrupt activities; and
(3) to establish statutory consequences for such offences.
Section 34 of PRECCA places a positive statutory duty on certain individuals and organizations, including those in the private sector, to report corrupt transactions. Section 34 provides –

“34. Duty to report corrupt transactions
(1) Any person who holds a position of authority and who knows or ought reasonably to have known or suspected that any other person has committed –
(a) an offence under Part 1, 2, 3, or 4, or section 20 or 21 (in so far as it relates to the aforementioned offences) of Chapter 2; or
(b) the offence of theft, fraud, extortion, forgery or uttering a forged document,
involving an amount of R100 000 or more, must report such knowledge or suspicion or cause such knowledge or suspicion to be reported to the police official in the Directorate for Priority Crime Investigation referred to in section 17C of the South African Police Services Act, 1995, (Act No. 68 of 1995).”
(2) Subject to the provisions of section 37(2), any person who fails to comply with subsection (1), is guilty of an offence.”

Section 34 can be broken down into four elements –

First element – A person who holds a position of authority

PRECCA defines individuals who hold positions of authority as, inter alia, the following –

“e. the manager, secretary or a director of a company as defined in the Companies Act, 1973 … and includes a member of a close corporation as defined in the Close Corporations Act, 1984…
f. the executive manager of any bank or other financial institution;
g. any partner in a partnership;
h. any person who has been appointed as chief executive officer or an equivalent officer of any agency, authority, board, commission, committee, corporation, council, department, entity, financial institution, foundation, fund, institute, service, or any other institution or organization, whether established by legislation, contract or any other legal means;
i. any other person who is responsible for the overall management and control of the business of an employer; …”

Second element – Who knows or ought reasonably to have known or suspected

The duty to report extends to all individuals holding a position of authority who knew or ought reasonably to have known, or suspected, that any person may have committed an offence. To assess whether a person should reasonably have known of or suspected the fact, PRECCA provides that it should be considered whether a reasonably diligent and vigilant person (with the knowledge, skill, training and experience expected of a person in the position of the person in question) would have known.

Third element – A reportable transaction

A reportable corrupt transaction is one that involves the offences of theft, fraud, extortion, uttering a forged document or an offence listed in Part 1 (the general offence of corruption), Part 2 (offences in respect of corrupt activities relating to public officers, foreign public officials, agents, members of legislative authority, judicial officers and members of the prosecuting authority), Part 3 (offences in respect of corrupt activities relating to receiving or offering unauthorized gratification by or to a party to an employment relationship) or Part 4 (offences related to specific matters relating to witnesses and evidential material during certain proceedings, contracts, procuring and withdrawal of tenders, auctions, sporting events and gambling games), or section 20 or 21 of PRECCA. It is beyond the scope of this piece to consider each of these offences in detail. However, it is necessary to consider the general offence of corruption.
The general offence of corruption as codified in Part 1 of PRECCA is very broad and can be committed by either/both parties to the corruption, i.e., the corruptor (the giver of the gratification) or the corruptee (the receiver of the gratification). Furthermore, both the giving and the acceptance of gratification with the intention to induce or be induced to act (or omit to act) in a certain way, falls within the confines of the general offence of corruption. The five elements constituting the offence of corruption are (a) the giving or acceptance, (b) of a gratification, (c) in order to act (or omit to act) in a certain way, (d) unlawfulness, and (e) intent. It is important to note that the mere offer to accept or offer to give a gratification meets the requirements of corruption under PRECCA.

Fourth element – An amount of R100 000 or more

For a transaction to qualify as reportable it must involve an amount of R100 000 or more. PRECCA is equivocal in respect of what aspect the R100 000 threshold relates to. It may either be the gratification or the transaction for which the gratification is offered. The two may provide a substantial difference. It is submitted that this requirement must be interpreted generously and if either the transaction itself, or the gratification exceeds the monetary threshold, the offence / suspected offence must be reported.
Penalties for failure to comply with Section 34
From 31 July 2004, the failure to report a corrupt transaction when required to do so by PRECCA, constitutes an offence under the act. Where a person is found guilty of the offence of not reporting the transaction, the following penalties may be imposed –
1) where the sentence is imposed by a High Court or Regional Court, the offender may be liable to a fine or imprisonment (for not more than 10 years); and
2) where the sentence is imposed by a Magistrates Court, the offender may be liable to a fine or imprisonment (for not more than 3 years).

In 2017 the PRECCA amendment bill (“the Bill”) was published. The Bill contains proposed amendments to PRECCA which will, inter alia, broaden the sanctions and penalties that can be imposed for non-compliance with the duty, and extend the duty on institutions to detect and report corrupt activities.

At Pagdens Attorneys we assist individuals and entities in the entire process of reporting corrupt activities as required by legislation. We further assist individuals and entities in the process of engaging with law enforcement agencies regarding the investigation, progress and prosecution of reported corrupt activities. Should you require any assistance, please do not hesitate to contact us at info@pagdens.co.za or 041 502 7200.

This article is for general information should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact an attorney for specific and detailed advice. Errors and omissions excepted (E&OE)