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Johannesburg - Five officials have been suspended and 65 000 companies will be deregistered by November as authorities come to grips with a crisis of so-called cloned companies.
The Companies and Intellectual Property Registration Office (Cipro) is trying to deal with the widespread duplication of companies on its database, which is allowing criminals to commit widespread fraud.
Along with the "precautionary" suspension of five Cipro employees, a number of cases have been opened with the South African Police Services to prosecute fraudsters who have been acting as Cipro agents.
Cipro CEO Keith Sendwe said: "Our aim is to bring those responsible for this crime to book and to put a watertight action plan in place to prevent any future reoccurrence of this heinous crime."
In January 2009, Cipro launched an investigation into the proliferation of company duplicates on its database.
Shortcomings in the Cipro system make it possible for fraudsters to register company names which are almost identical to those of existing legitimate companies.
Payments intended for the legitimate company are then diverted to false bank accounts.
For instance, in January R51m in refunds from the South African Revenue Service (Sars) to Sun Microsystems and SBC International Management were diverted to cloned companies in this way, according to Sake24.com.
One of the problems highlighted was that many directors were registering under false identities. Cipro says it is working with home affairs to find a solution.
Said Sendwe: "The process has been hampered by logistical issues, so it will only be live in the next couple of months."
In some cases the registered details of directors, too, have been changed, making it possible for perpetrators to open new bank accounts.
Payments intended for the legitimate company are then diverted to the false bank accounts.
Cipro has implemented a new customer verification system to deal with this.
Customers need to be verified and authenticated by a registered Commissioner of Oaths before they will be allowed to effect electronic changes on their company profile, said Sendwe in a media release.
He confirmed that a "considerable amount" has been lost because of the cloning, with money ending up in false bank accounts.
According to Sake24.com, Sars has suffered losses of R120m due to cloning scams.
On the possibility that irate business owners may hold Cipro liable for losses, the Cipro board announced on Friday that there were no legal suits pending.
- Fin24.com