Companies need good systems for the preservation of evidence in the event of fraud

South Africa

There can be no doubt that South Africa has a major fraud problem. In fact, a 2020 PWC survey found that the country now ranks third -- behind India and China -- in terms of the number of reported incidents of financial crime. The same survey found that the 245 participants had lost a collective US$1.7-billion to fraud over the previous 12 months. Of those, seven percent of respondents had experienced losses in excess of US$50-million, with four percent experiencing losses of more than US$100-million.

It’s also clear that the threats come from all sides, with PWC saying that 41% of perpetrators come from within companies, 36% come from outside, and 21% crimes occur as a result of collaboration between internal and external parties. And while the National Prosecuting Authority reports a conviction rate higher than the 75% set out as a target by the Financial Action Task Force (FATF), organisations still have an important role to play when it comes to deterring would-be fraudsters.

A major part of that is having the systems in place needed to preserve evidence in the event that they fall victim to fraud.

Readying your organisation for remedy

In order to understand why evidence preservation is so vital, it’s important to realise that when any organisation in either the private or public sector faces a commercial crime incident, it needs to establish whether any funds have been lost and whether there are any possible remedies for recovering those losses.

These two considerations should be taken into account at the outset of the response to any commercial crime incident. The answers provided should inform the steps that need to be taken when it comes to dealing with the incident, especially when it comes to appropriate evidence gathering through the course of the investigation.

By properly preserving evidence, organisations give themselves a much better chance at success if civil proceedings are instituted to recover misappropriated funds. Many cases have failed because evidence wasn’t properly collected at the outset of the investigation.

Anton Piller orders

One of the most important tools any South African organisation has in its arsenal when it comes to preserving evidence is the Anton Piller orders. Named after the most prominent case on the subject, Anton Piller KG v Manufacturing Processes, the order allows applicants to attach and safeguard evidence in the possession of the respondent, especially if they’re worried that the respondent will destroy the evidence when they’re notified of the proceedings.

Whether or not the person is found guilty at the end is not really the focus of an Anton Piller order. The focus of the Anton Piller is to preserve evidence to make sure that you can make a factually correct determination as to whether or not the person is guilty or not.

In order for an Anton Piller order to be granted, a number of conditions must first be met. First, there must be an extremely strong prima facie case against a respondent. Secondly, the potential or actual damage must be very serious. Finally, there must be clear evidence that the respondent has incriminating evidence in their possession, and there is a real possibility they may destroy this material if they were to become aware of the applicant’s application.

Once the order is granted, the court will appoint a sheriff and an independent attorney to enter and search the premises of the respondent and seize the items mentioned in the order. The items will then be preserved at the sheriff’s office to enable the applicant access should they need them to prove their case.

It’s important to note, however, that an Anton Piller order is an extreme form of remedy and strictly for the preservation of evidence. It’s also important to note that it’s not designed to be prejudicial to the respondent.

Other options and justifiable cause

If an organisation feels that it doesn’t meet the threshold requirements for an Anton Piller order, there are other steps it can take to preserve evidence. If you’re dealing with a workplace incident, for instance, you can make a copy of the individual’s laptop. This doesn’t have to be done with their knowledge and can be used for both evidence gathering and preservation.

As an employer, you are also entitled to do the same to an employee’s personal laptop or smartphone if it’s synced with the organisation’s internal systems.

No matter what steps you take, however, it’s important to remember that you will only stand a reasonable chance of succeeding in court if you have justifiable grounds for taking those steps. You cannot, for instance, investigate someone just because they do the company payments. You also have to see significant lifestyle changes, such as a new car beyond what their salary could reasonably pay for. Once you have those justifiable grounds, the important thing is to act as soon as possible, rather than waiting.

Be prepared

Fraud can cause extreme financial and reputational damage to any organisation. But with the right safeguards in place, organisations can mitigate those damages and even recover some of the financial losses.

It’s also clear that every organisation should have those safeguards in place. No one can afford to take an attitude of “It won’t happen here”. In a country where billions of rands are lost to fraud every year, that’s simply not tenable.