Even as South Africa gears up to be delisted from the Financial Action Task Force (FATF) grey list, a major issue persists because of the availability of illegally registered SIM cards that are used in various crimes, including financial fraud.
Veteran ICT commentator Adrian Schofield says the entire point of South Africa being grey listed by the FATF was to tighten controls around financial crime.
"They specifically highlighted terrorist financing as an issue. It's all too easy for nameless, faceless individuals to finance crime by transferring money via pre-registered SIM cards. This appears to have been overlooked when the FATF signed off on South Africa implementing all 22 recommendations."
Criminals always find workarounds, Schofield notes. "But clamping down properly on RICA enforcement would at least eliminate some of this crime."
Pre-registered SIM cards fundamentally undermine law enforcement. "When police can't trace communications back to criminals, the legal provisions for court-ordered interception become pointless. They simply can't do their jobs."
This is an issue that has been raised repeatedly. In a 2023 letter to the Portfolio Committee on Justice and Correctional Services, from Baker & McKenzie on behalf of Premium Ideas South Africa, the lawyers stated that pre-registered SIM cards cause “the obvious and direct risk of increased criminal, money-laundering and terrorist activity, and the concomitant impact on law enforcement's ability to combat these crimes”.
The legal firm added that “the inability to trace and combat money-laundering and terrorist activities has indirectly affected the South African public and its economy through the country's recent grey listing by the FATF”.
Compliance failures
South Africa expects the FATF Plenary to visit this month, at which point it will determine whether the country can be removed from the grey list.
In February 2023, SA was placed on the list due to deficiencies in its anti-money-laundering and counter-terrorism financing regime, which was found to have insufficient mechanisms to combat financial crimes.
In June, National Treasury said: “South Africa has substantially completed all 22 action items that were contained in the Action Plan adopted when South Africa was grey listed.”
Among the key shortcomings identified by the FATF were inadequate investigation and prosecution of illicit activities, limited ability to seize illicit assets, and underdeveloped understanding of terrorist financing threats.
University of Johannesburg research associate and forensic practitioner, Ratlhogo Rafadi, wrote about the problem of pre-registered SIM cards in May. He argues that pre-registered SIM cards are known to be associated with terror finance as criminals can conduct their activities while eliminating the chance of them being traced.
Often flouted
The Regulation of Interception of Communications and Provision of Communication Related Information Act (RICA) – passed in 2002 – required that everyone who was in possession of, or subsequently bought, a SIM card must register personal details with the network. Personal details, identity number and proof of address are required.
RICA establishes a legal framework that permits law enforcement agencies to intercept communications such as phone calls, e-mails and text messages during investigations of serious crimes.
Mohamed Hassim, CIO of Securi-Tech SA, which offers services such as SIM card encoding and personalisation, says illegally registered SIM cards are a “massive problem” that is hard to quantify.
However, Rafadi notes that most of the 165 million SIM cards that are issued each year are not likely to comply with this law, which creates “loopholes that are exploited by criminal syndicates”. The high number of SIM cards is because many South Africans have multiple ones.
ITWeb understands that around four-fifths of SIM cards issued every year end up outside of the formal system – thrown away because another vendor may offer public-facing outlets a better deal to rather sell their cards – which leaves 80% of SIMs susceptible to being pre-registered.
Baker & McKenzie also says pre-registered SIM cards mean no transactions or communications can be traced. “Individuals, criminals and terrorist organisations are able to abuse the anonymity associated with pre-activated SIM cards, in consequence of which the commission and financing of crimes become easier, while combatting crimes becomes more difficult.”
Available on every corner
The prevalence of pre-registered SIM cards is at the point where you can walk into a corner shop – or even a cellphone repair shop – and request a pre-RICAd SIM card.
ITWeb tested this with two different SIM cards. One – an MTN one – came preloaded with 10GB of data. The store had an array of network cards across each mobile operator from which to choose.
The problem is that, should the police need to trace the number back to the owner, they can't because it has been activated in someone else's name, says Hassim. “So, the cops are basically looking for Mickey Mouse, who they can't find.”
In January, in response to a written question, the then minister of police, Senzo Mchunu, said the department had identified that 61.82% of all extortion cases in the 2024/25 financial year involved the use of unregistered SIM cards.
The department's response said unregistered SIM cards had not been found to have been used in kidnapping, murder, robbery, or cash-in-transit heists.
Another issue Hassim cites is the fact that there is no integration between different mobile network operators' databases.
"A failure to control the wholesale abuse of pre-registered SIM cards will further dismantle national security, drain public faith in electronic money systems and facilitate organised crime,"Rafadi writes.
Neither the Department of Justice and Constitutional Development nor the Department of Communications and Digital Technologies responded to requests for comment.
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