QUESTION 1 50 MARKS

Dwaynes Gym is a popular gym located in the Warrenton suburb of Gqeberha. Mr Dwayne is the sole proprietor of the gym. He is under investigation by the authorities for an alleged money laundering scheme. It is suspected that he laundered money for criminals for a fee through his legitimate gym business. The first key phase of money laundering is the placement of dirty money generated from criminal activities, in a legitimate business in order for it to be subsequently used or disbursed in a seemingly legitimate way. In the case of Dwaynes Gym, this can be achieved by, for example, the making of direct small cash deposits by criminals into the gyms bank account, thereby mixing dirty cash with the cash from legitimate gym members creating fictitious income), or even by the criminals paying for some of the gyms legitimate expenses in cash. Thereafter the legitimate gym business may employ various tactics to layer (the second key phase of money laundering) the dirty money through a series of transactions and bookkeeping tricks. This is achieved, for example, by buying gym equipment, investing in sports memorabilia to use as decoration in the gym, etc. Mr Dwayne purchased rowing memorabilia to the value of R340 000 via the internet on 16 November 2021. However, he was not satisfied with the quality of the products and returned it for a credit refund a month later. Additionally, he also purchased a limited-edition wooden canoe on 17 December 2021, for R464 000 and later sold this canoe for R470 000 during January 2022. Finally, the now cleaned money goes through the integration phase, the third key phase of money laundering. Essentially this entails using the money in the gym in what appears to be a legitimate way. If Mr Dwayne is indeed guilty of facilitating money laundering for criminals, he would typically need to, for example, sell some of the assets he acquired in the layering stage or create fake expense accounts. It is worth noting that, in the placement stage the criminals could pay for some of the gyms legitimate expenses in cash. Now, at the integration stage, the gym could simply allocate these funds to another kind of (fictitious) expense, as the gym still has legitimate money in its bank account that have not been used for legitimate expenses. The end result is the same the gym has expenses, and they are paid. It is the series of events through which they are paid that facilitates the act of money laundering. CONFIDENTIAL Page 6 of 10 AUE4866 OCT/NOV 2023 [TURN OVER] Mr Dwaynes triplets are all South-African rowing champions. Theyve all taken part in international competitions since they were 14 years old (in 2021). Mr Dwayne has accompanied his children on trips to Nigeria, Mozambique and Senegal. He is a VIP member of the South African Flying High Club, which earns him miles every time he travels outside of South Africa. He prefers taking large sums of cash with him on these trips and distributes equal amounts to each of his three children to transport in their luggage. Below is the statement of financial position and statement of comprehensive income for Dwaynes Gym. Review the financial information and answer questions 1.1 to 1.4 that follow. STATEMENT OF FINANCIAL POSITION ON 31 DECEMBER 2022 31-Dec-22 R 31-Dec-21 R Assets Property and gym equipment 1,320,000 1,720,000 Non-current assets 1,320,000 1,720,000 Cash 111,800 340,000 Accounts receivable 1,400,000 800,000 Inventory 190,000 180,000 Current assets 1,701,800 1,320,000 Total assets 3,021,800 3,040,000 Equity Owners equity 300,000 300,000 Retained earnings 1,381,800 1,110,000 Equity attributable to owners of the Company 1,681,800 1,410,000 Total equity 1,681,800 1,410,000 Liabilities Trade and other payables 1,140,000 980,000 Current liabilities 1,140,000 980,000 Loans and borrowings 200,000 650,000 Non-current liabilities 200,000 650,000 Total liabilities 1,340,000 1,630,000 Total equity and liabilities 3,021,800 3,040,000 CONFIDENTIAL Page 7 of 10 AUE4866 OCT/NOV 2023 [TURN OVER] STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2022 2022 R 2021 R Continuing operations Revenue 5,950,000 4,450,000 Membership fees 4,000,000 3,000,000 Personal training 1,200,000 1,100,000 Merchandise sales 400,000 300,000 Locker rentals 350,000 50,000 Cost of sales 1,375,000 1,175,000 Trainer salaries 1,000,000 900,000 Merchandise cost 375,000 275,000 Gross profit 4,575,000 3,275,000 Operating expenses 983,200 400,000 Rent 990,000 720,000 Marketing 300,000 100,000 Depreciation 25,000 300,000 Insurance 80,000 150,000 Administrative expenses 325,000 75,000 Results from operating activities (earnings before interest and tax) 1,871,800 1,530,000 Interest and taxes 490,000 420,000 Net income 1,381,800 1,110,000 REQUIRED MARKS

1.1 Motivate why a horizontal analysis would be an appropriate type of financial statement analysis to test the validity of the allegations against Mr Dwayne. (10) 1.2 Perform a horizontal analysis on the financial information given above and show all your calculations. (15) 1.3 Considering the information in the scenario and the results of your calculations in question

1.2 above, conclude whether there is support CONFIDENTIAL Page 8 of 10 AUE4866 OCT/NOV 2023 [TURN OVER] for the allegations that Mr Dwayne is laundering money for criminal associates. Tip: Try to link everything that you identify as suspicious to one of the three key stages of money laundering (placement, layering and integration). This may assist you to justify why your suspicions have merit. (20) 1.4 Based on your interpretation of the information in the scenario and your answers to questions 1.1 to

1.3, identify and briefly explain two methods that Mr Dwayne may use to return the money to the criminals (who initially placed the proceeds in Dwaynes Gym), so that it appears to be clean money. (5)

QUESTION 2 50 MARKS

Further to the scenario provided in question 1, read the following additional information and then answer question 2. Assume Mr Dwayne was arrested on charges of money laundering and that a witness, Mr Blazer, has come forward to testify against Mr Dwayne. Mr Blazer is the head accountant of Dwaynes Gym and confidant of Mr Dwayne. The investigating officer of the South African Police Services (SAPS) dealing with Mr Dwaynes case asks Mr Blazer if he could start writing his statement, because the said officer is testifying in another case and is unavailable to take Mr Blazers statement. Mr Blazer is not sure how to do this, and contacts Mr Alex John Smith, a private investigator in Gqeberha. He found Mr Smiths details in the classifieds section of the Gqeberha Gazette. Mr Smith qualified as a CA(SA), but a chance encounter with an eccentric forensic investigator piqued his interest in the field, causing him to pursue a career in chasing white-collar criminals. He has no formal training in the field of forensic investigations and relies on the internet and MeTube videos to teach him the basic skills necessary to assist clients. Mr Smith agrees to help Mr Blazer, and after asking him a couple of questions, he prepares an affidavit as reflected in ANNEXURE A2 below. Mr Smith has never prepared an affidavit for a client, but he heard of a programme called Talkie-Talkie, an artificial intelligence chatbot that can create humanlike conversational dialogue. He is hopeful that this chatbot can assist him with a comprehensive example of an affidavit. He duly proceeds to type create a witness statement under oath for a money laundering case according to South African legislation into the programme and uses it as a basis for Mr Blazers statement. CONFIDENTIAL Page 9 of 10 AUE4866 OCT/NOV 2023 [TURN OVER] ANNEXURE A2 In the High Court of South Africa (Gauteng Division, Pretoria) Case No: 2023/08/18/340958 In the matter between: [THE STATE] and [WAYNE DWAYNE] ________________________________________ AFFIDAVIT I, Alex John Smith, of 34 Penguin Crescent, Warrenton, Gqeberha, 3187, do hereby make oath and say: 1. I am an adult citizen of South Africa and am competent to depose to this affidavit. I am willing to testify to these facts if required. 2. I am not well acquainted with the defendant, Mr Wayne Dwayne, in the abovementioned case. I have not had direct interactions and observations related to the matters under investigation, specifically regarding allegations of money laundering. 3. However, a trusted employee of Mr Dwayne, Mr Blazer confided in me and I believe he is telling the truth. 4. Mr Blazer has observed and has reason to believe that Mr Dwayne has been involved in activities that constitutes money laundering under South African law. The specific observations and events he has witnessed include, but are not limited to: a. Specific transactions, movements of funds and financial activities that raised suspicions of money laundering. b. If applicable, mention any involvement of third parties, businesses, or entities in these activities. 4. I further believe that Mr Dwayne has taken steps to conceal the proceeds of his alleged money laundering activities. This includes buying and selling high-value assets regularly and having third parties pay for business expenses in cash 5. I do not have access to detailed financial records or documents related to these transactions, as there was a fire in Dwaynes Gym just before he was arrested, and all financial records and documents were destroyed. CONFIDENTIAL Page 10 of 10 AUE4866 OCT/NOV 2023 6. I am fully willing to cooperate with law enforcement authorities, legal representatives, and the court in providing further documentary information and testimony as may be required in this matter. 7. I understand the legal implications of making a false statement under oath. I declare that this affidavit is made in good faith, and I affirm the truthfulness and accuracy of its contents. 8. Signature of Deponent: _______ __________(Mr Blazer)_____ Date: ______________________ Sworn to and signed before me at [City] on this [Date] day of [Month] [Year]. Commissioner of Oaths: ___ ___________________ Full Name of Commissioner: Alex John Smith Address of Commissioner: Wanderers Office Park, 34 Penguin Crescent, Warrenton, Gqeberha, 3187 Contact Details of Commissioner: 041 555 8423 REQUIRED MARKS

2.1 Based on the information provided in the scenario, ANNEXURE A2, and your knowledge of the process of forensic investigations and witness statements, discuss what is wrong with the approach followed by Mr Smith when he assisted Mr Blazer to prepare his witness statement. Note: Justify your answer by, inter alia, providing examples of mistakes made in the affidavit. Do not make recommendations for improvement. (25)

2.2 Rewrite the affidavit prepared by Mr Smith to correctly reflect the details he should have taken down from Mr Blazer in a sworn witness statement. The affidavit must contain all the information that can be used in proving a case of money laundering against Mr Dwayne. You are allowed to make assumptions to prepare the statement, where necessary. For example, Mr Blazer could have remembered that he has access to a backup of the financial information, stored off-site. (25)