SA has earned itself a comfortable niche among the world’s hot spots of economic crime. According to a recent global survey conducted by auditing firm PwC, 69% of respondents in SA (drawn from the public and private sectors) claimed to have experienced some form of economic crime in the past two years, compared to 37% of respondents globally.
Transparency International’s latest research also shows that SA keeps bad company in global perceptions around economic crime, as the country is also perceived to be one of the main drivers of rising corruption in Africa.
The main categories of economic crime are asset misappropriation, procurement fraud (which is rising rapidly, according to EY), bribery and corruption, human resources fraud, financial statement fraud and, especially of late, money laundering.
“This has brought a proportionate increase in the number of firms investigating these crimes,” says Khusial.
Albert van Zyl, who is attached to the forensic accounting division of the North West University, says that of the 85,000 practitioners registered with the international Association of Certified Fraud Examiners, 10,500 are based in SA — a phenomenally skewed number which speaks volumes.
Though detection rates of forensic practitioners are generally superb, Khusial believes reacting to an offence does little to solve the bigger problem. This is why there is a need for a different and, in his view, ethically driven approach. To borrow the words of Chief Justice Mogoeng Mogoeng this week, ethical structures leave little room for corruption to flourish.
Van Zyl also punts for early detection, but argues it differently. “We all know that the criminal justice system is not what it should be,” he says. “It’s costly and it’s time consuming. And corruption, and any other economic crime, is a risk that businesses can no longer afford.” It does financial and reputational damage.
Whatever the imperative, the basis of this new proactive approach remains the same, says Khusial. Falcon, for example, combines investigations with risk management and consultancy.
Khusial’s critics — mainly his peers — tell him he is shooting himself (and the field of forensics) in the foot by teaching potential clients how “not to need” their services.
“But my response is that there will always be a demand for forensics, and we need to become more proactive.”
For example, once Falcon completes a forensic investigation, the focus shifts to putting in place a protection mechanism to ensure the same crime doesn’t happen again. “Or we might be called in by a company to look for vulnerabilities in their systems, even without there being any suspicion of wrongdoing.”
Obviously, a proactive approach requires a significant technology component.
Khusial started out with one of the big auditing firms more than 17 years ago, before co-founding Shield Technology and later Falcon. Today, he boasts a 92% detection rate on cases, some worth many billions of rand, and subcontracts to some bigger firms. His client base is a combination of government and private entities, in a 40:60 mix.
Yet Falcon is difficult to find, with only a negligible presence on the Internet. Khusial says “that’s because of a previous contract we had with national security divisions, which required us to keep a low profile. But that contract ended last year and you can expect to hear more about us from now on.”
His cases have included a US$100m pyramid scheme, fraud in student bursary schemes and e-toll infringements.
In 2012, Khusial was also part of the team that controversially investigated former NPA prosecutor Glynnis Breytenbach for professional misconduct during the Imperial Crown Trading mining rights saga.
In a disciplinary hearing, Breytenbach was accused of wiping data from her laptop, but she was acquitted in 2013. However, earlier this year, criminal charges were brought against her over this issue — something she claims was a politically driven prosecution now that she is a DA MP.
Khusial has also played a role in fighting rhino poaching in a case about to enter the prosecution phase. Most recently he was roped in to examine evidence in the ongoing Fifa scandal, though he refuses to say who his client is.
In all instances, he played the role of the cyber forensic. “It’s virtually impossible to carry out an investigation today without forensic technology,” he says. “It is these tools, or written programs, that place businesses in a position to do valid detections.”
If proactive is the new reactive, then technology is its enabler, he insists. “You just cannot reach early detection without it.”