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CIPRO's database being used to divert tax returns to bogus bank accounts
Companies currently vulnerable to fraudulent activities
DA calls for establishment of forensic investigation team





The practice of fraudulently using the Companies and Intellectual Property Registration Office's (CIPRO) database to divert tax returns from SARS to bogus bank accounts should be addressed with due urgency. These practices are not possible without the collusion of officials from both SARS and CIPRO. The fraudsters, with the help of CIPRO's staff, deregister legitimate directors in its database. They then open bogus bank accounts and, with the help of SARS officials, change the banking details of the targeted company in order to direct funds due to it to a bogus bank account. The Democratic Alliance (DA) calls for the immediate establishment of a forensic investigation team - comprised of CIPRO, SARS, and the banks - to probe this scam and investigate ways to curtail this type of fraud.

To illustrate the severity of the problem, the Minister of Trade and Industry, Rob Davies, revealed in his reply to a parliamentary question asked by my colleague Andricus van der Westhuizen, that CIPRO currently has 280 903 companies, 1 652 212 close corporations and 35 760 co-operatives on its database. Until urgent action is taken to overhaul CIPRO's IT system, all these companies will be vulnerable to fraudulent activities. This is likely to deter both foreign and domestic investment in South Africa.

This scam, which PriceWaterhouseCoopers revealed last month, is but the latest misdeed that can be traced to the CIPRO IT system. Other irregularities include:

• The recent fraudulent removal of companies' directors from CIPRO's database, exemplified by the Kalahari Resources case;
• The refusal of Minister of Trade and Industry, Rob Davies, to make public the results of the R1 million forensic audit by SSG into CIPRO's controversial Electronic Content Management tender;
• The suspension of CIPRO's Chief Executive Officer, the late Keith Sendwe, and Chief Information Officer Dr. Michael Twum-Darko, who were allegedly involved in rigging a R152 million Electronic Content Management (ECM) tender to ValorIT (as Minister Davies told Scopa in May of this year);
• The recent abrupt termination of the services of investigators who were contracted to probe corruption at CIPRO;
• The failure of CIPRO officials to appear in Parliament in April 2010 to answer questions on issues of corruption involving its senior officials. This showed complete disdain for the role and oversight function of Parliament.

These problems are indicative of a deepening malaise at the heart of CIPRO, and continue to do serious damage to the reputation of the Department of Trade and Industry. If left unchecked, this endless trickle of scandals, examples of maladministration and poor leadership will lead to the slow and painful death of CIPRO, and the DTI itself will not escape unscathed. If the DTI is set on fixing the problem once and for all, it needs to adopt a more drastic position. First, it needs to thoroughly understand the extent of the problem through a forensic audit; then it needs to rectify it by putting CIPRO under administration. Failure to do so will only exacerbate the problem.