Fraud is fast becoming the new national sport. It CAN happen to you.

ALEC HOGG: Well, our colleague, the editor of Politicsweb.co.za, James Myburgh joins us now. James, you've been digging around at Cipro, the Companies and Intellectual property Registration Office. A couple of weeks ago you published a story which showed that Sun Microsystems, a multinational, and a couple of other businesses were fraudulently registered, and today it showed that that was only the tip of the iceberg.

JAMES MYBURGH: Yes, hi, Alec. Basically what I was looking at was the story of directors of well-known companies being deregistered and fraudulent directors being put in their place. And that was being done to E-lodgement of the CM29 form, which they halted in February this year, although it didn't stop the problem completely. And that led to a further investigation, and that revealed the creation of counterfeit companies, and that's where companies are registered with almost the same name as the original company, and that's used then to carry out various kinds of fraud.

ALEC HOGG: You'd have, for instance, Mabula Game Reserve, which is the real company, and another company registered as Mabula Game Reserve No 1, or 01.

JAMES MYBURGH: Yes, what often seems to happen is these criminal syndicates will intercept a cheque in the mail to say a company like Giant Canning, say for a few hundred thousand rand or so, then they'll go to Cipro and they'll get the company registered in that company's name, so it would be Giant Canning Gauteng in this case, and then they would try to open a bank account in that company's name. And if they succeeded, they would then cash the cheque into that account.

ALEC HOGG: Thebe Medicare, the Media Shop, Eli Lilly, Chipkins, pshew, 114 names that you've published on the website. Are there more?

JAMES MYBURGH: That's just from my research over the past week, really.

ALEC HOGG: So how would the companies know that they've been had?

JAMES MYBURGH: Well, often they are contacted by the bank, and if the bank's alert they'll try and contact the original if they smell something fishy. Otherwise their suppliers will contact them and say, you know, or their clients will contact them and say, "Why haven't you paid?" And one side will say, "Well, you cashed the cheque."

ALEC HOGG: But for at least 114 that we know of - there could be hundreds of other companies that could be affected the same way - there has to be some inside job here, James.

JAMES MYBURGH: Well, Cipro is not allowed to register companies with similar names. And one of the complaints of the auditors I spoke to, is if you try and register a company legitimately, is that Cipro is very picky, that it's very hard to do. They often reject names, as they should do, if they are too close or if there might be any confusion. But then there's this parallel criminal process in which there's almost a free for all.

ALEC HOGG: We've got fraud expert David Alexander with us in the studio. This kind of thing surprise you, David?

DAVID ALEXANDER: Alec, not really. I think where there is great reward there is great temptation, great incentive to put something like this in process. And unfortunately in government departments there may be either issues of remuneration or issues of a disincentive of some sort in the structure and the ethics and the whole culture of the organisation that makes people do things that they shouldn't do.

ALEC HOGG: If I was running Cipro, I'd ask someone like you to come in and show us how we can get the checks and balances that take the human intervention out of it. In a  case like this, clearly, those checks and balances just don't exist.

DAVID ALEXANDER: Two things happen - the basis of any good security system is the engagement of all the people in the organisation in security and in fraud prevention. And people have got to have a combination of human element and systems. And what sometimes happens is so much reliance is placed on systems that people sit back and say: "Our system is foolproof, therefore I don't have to pay too much attention to the human element, because the system is going to protect me." Now, there is no system in existence that can protect you. The security is a combination of the human element and the systems element.

ALEC HOGG: Just to pick up with Pat Goldrick. He is the chief executive of Cashbuild. Pat, how have you been affected?

PAT GOLDRICK: What happened to us, Alec, was in June this year. We noticed that our board directors were removed from one of our subsidiaries of a subsidiary - not the listed company, but the next one down, a subsidiary of that, and an exchanged director was appointed on there. We picked it up in June, and reported it from there.

ALEC HOGG: Was there any fraudulent activity?

PAT GOLDRICK: No, no fraudulent activity ... it doesn't mean it can't happen, and I think they could use our name to defraud other companies. But to get money out of Cashbuild would be very difficult that way.

ALEC HOGG: How did you find out about this?

PAT GOLDRICK: We are transacting by buying properties and stores, etc, and when we were doing a transaction on a property we identified it then. But we do transactions quite regularly, so we would have picked it up anyway over a period of time when we check these kind of things. On our risk etc, we check our bank account, and we would have picked anything up that would have been strange in a very short period of time. If it had maybe been on there for a few months or a few weeks I don't know.  I'd have to give you an answer on how long it was since it was changed before we noticed it.

ALEC HOGG: Pat Goldrick, chief executive of Cashbuild. Well, there you get an example, David, of how the guys go about it. Take off the names of the legitimate directors, replace them with other directors, presumably so that you can go along to the bank and say: "I'm Mr Smith, Cipro shows that I am a director, I will open a bank account." And of course use that to defraud the company.

DAVID ALEXANDER: Alec, syndicates work in a way of using dupes that do exactly that. And quite often the person that they use's identity they may have stolen, doesn't even know that he is being put forward as a director of a company. But it also goes further than that. There is the possibility of corporate abuse, of changing dates of appointments of directors, for example, when there is something dodgy going on in a company. You have your contact in Cipro, he's done something dodgy in the past, so you just push forward or you push back, whatever, change the CM29. There's all sorts of abuses. And the problem that is faced is it is very difficult to get to the actual perpetrator, because he's hiding behind three other people.

ALEC HOGG: And if you can't trust Cipro, what can you trust? Adrian Lackay joins us now. He's from the SA Revenue Service. Adrian, have you been picking up? We did speak to you, SARS, a couple of weeks ago, about the losses that some companies like Sun Microsystems have got. That was only the tip of the iceberg, it appears.

ADRIAN LACKAY: Good evening, Alec, and thank you for the opportunity. Yes, corruption of this form is a serious problem. I think it becomes more serious and more problematic for institutions like SARS or Cipro when there is collusion by employees with external criminal elements. When Moneyweb reported on this matter on 24 July we were able to see that, in terms of our systems, we picked up some fraudulent or suspicious activity in January this year. A SARS employee was then suspended and subsequent to that another individual, unrelated to the organisation, was arrested. So it is very concerning that these things do happen, but it's very difficult also when there's collusion from the inside, people who can access confidential information, in this instance of taxpayers, and I am sure in the instance of Cipro our confidential company information. So we'll have to work together and find ways to protect institutions and institutional integrity against such forms of abuse.

ALEC HOGG: Adrian, this looks like fraud on a  massive scale. As James Myburgh was saying earlier, we published the names of 114 of these dodgy companies, and those are the ones we have been able to find. There must be many, many more than that and I guess as far as SARS is concerned, you could be a prime target for these thieves when you send out VAT refund cheques or income-tax refund cheques, for instance.

ADRIAN LACKAY: Ja, that's why we stopped the issuing of refunds to taxpayers through cheques. We do all of it electronically into bank accounts, but still there is scope for abuse. The problem is also that the fiscus suffers, of course. In the instance you reported on a month ago, we would probably have to write off about R51m. We are in the process of working with the Assets Forfeiture Unit to recover a further R75m or some amount to that extent, where we think we are able to either confiscate property, freeze assets in order to recover losses that the fiscus has suffered to this point.

ALEC HOGG: More strength to your elbow, Adrian Lackay. David, just to close off with, to give you an example of what happened with Moneyweb - one of our service providers, we hadn't received an invoice from them for three months. Our financial director called them and said, "Please can we have an invoice?" It was duly sent - it was a sizeable amount of money, R180 000, and R372 or something at the end. Julie paid the money into their bank account. The next day there was a deposit in our bank account of an identical amount of money, and a fax was sent to us, saying, "Our bank account details have changed - please would you deposit it into this new bank account detail." We duly did it, because the assumption was made that the company had - in fact, the name on the invoice was phoned, the guy said yes, from Profile Media, please send the money through. Fortunately there was a sharp teller at Nedbank, and when these fraudsters went in and tried to draw from the R180 000 - by the way, they had just deposited a stolen cheque into our account - they were then stopped by the teller, and the whole thing unravelled. But we were very lucky today because there was a good teller on the other side. But how does a company protect itself against this?

DAVID ALEXANDER: Alec, I think the first thing companies must do is if any requests for a refund of that nature comes, before that refund is made, it must be really carefully investigated.

ALEC HOGG: When someone says to you, "We have changed our bank account."

DAVID ALEXANDER: You cannot accept it just on face value. In fact, in that case, the MD of the company or the financial director should verify that independently, because obviously somewhere there is collusion - because where did they get the information of exact amounts, exact dates? Got the letterhead or even what a  letterhead looks like in order to fabricate one. So there's collusion somewhere along the line. The only way to cut out that collusion is independent verification  with somebody that you know in that company. So if you know the financial director personally, call him personally.

ALEC HOGG: But what must be worrying in a case like this is how many other clients of this company and many other companies have been taken, and they just don't know they've been taken yet.

DAVID ALEXANDER: Well, there could be hundreds, because people unfortunately trust people, and they trust paper and they trust what they see. And when they see the facts, they see the invoice, they see the deposit, they trust that things are on the up and up. But you cannot do that. Refunds are a prime target for fraud. So if anybody says to you "I've overpaid you, I've changed my bank details," you have to independently verify with somebody you personally know at that company.

ALEC HOGG: It seems like there's an epidemic or pandemic, as James Myburgh described it today. Is it getting worse?

DAVID ALEXANDER: Definitely, Alec. I think it's a combination of the tough economic times that we have, perhaps an approach, an attitude, maybe even a  national attitude that we have of a culture of entitlement which goes towards it. We have a lot of foreign substantial criminal syndicates. A lot of these things are not operated by South Africans. They are very sophisticated. You remember the case with the SMS confirmation for banking details. People said it is absolutely impossible, the system is foolproof, it cannot be intercepted. Well, it was, and it's done by very sophisticated people operating very sophisticated syndicates - and we are a target.

ALEC HOGG: Be on your guard. Be on your guard. And when you see the headlines in media outlets about fraud taking off, and this kind of thing, I guess it's like when you see the statistics on crime - it won't happen to me. Well, it can.

DAVID ALEXANDER: And the thing is, Alec, people regard, companies generally regard training of staff to be a grudge purchase - it's something I don't have to do now, economic times are tough. But when better to increase the awareness of your company and put your guards up than right now, not when you think you can afford to do it. You've got to do it now. The crisis is now.

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Appoint people with zero integrity and no work ethic and you get an organisation where everyone is out for an easy and quick buck. Of course when you, the tax paying citizen, try and get service that is just out of the question. CIPRO staff just provide a rubbish service, if it in fact could be called . .more that. They should actually monitor the time it takes before a telephone gets answered. Somehow I doubt it that anyone at dti actually cares. . .less by what'd you expect on August 08 2009, 22:25 Find this comment inappropriate? Report it

Funny Goverment It just beats me, all the feable excuses like it is really dificult and a person has been suspended. Probably the new Africa syndrome of accept no responsibility & do like your elders by George on August 11 2009, 08:28 Find this comment inappropriate? Report it

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