COMPENSATION FUND STRENGTHENS ANTI-FRAUD CONTROLS AND  RECORDS A SIGNIFICANT REDUCTION IN FRAUD LOSSES 

The Compensation Fund (CF), an entity of the Department of Employment and Labour, notes with serious concern recent media reports highlighting fraud-related losses and governance challenges within the Fund. These reports, which refer to fraudulent bank account changes and intercepted payments, point to historical control weaknesses that created opportunities for abuse.

The Fund wishes to clarify aspects of the matter that are not fully reflected in the article as follows:

The Fund acknowledges fraud losses over recent financial periods; however, it is critical to emphasise that these losses have been brought to light largely through the Fund’s own strengthened audit, oversight, and investigative processes, reflecting a maturing system that is increasingly capable of detecting, exposing, and responding to fraud rather than allowing it to remain hidden.

While these matters are of concern and are taken seriously, it is important to emphasise that the issues being reported are largely the result of intensified internal oversight, strengthened audit processes, and improved detection capabilities within the Fund. These developments reflect an organisation that is actively identifying and addressing historical weaknesses, with a clear focus on strengthening systems, enhancing accountability, and protecting the resources entrusted to it for the benefit of workers and their dependents.

Acting Director-General (ADG) of the Department of Employment and Labour, Ms Jacky Molisane, highlighted the gravity of the situation and the urgency of corrective action, stating that any diversion of funds intended for injured workers is unacceptable and demands decisive intervention.

The ADG further clarified that the exposure of fraud should not be interpreted as institutional inaction, but rather as evidence of improved transparency and enhanced internal controls. According to Ms Molisane, strengthened audit processes, better monitoring systems, and increased scrutiny have enabled the Fund to identify fraudulent activities more effectively, thereby laying the foundation for accountability and reform.

Encouragingly, the Compensation Fund has already demonstrated measurable progress in reducing fraud-related losses. Reported fraud losses declined significantly from R32 million in the 2023/24 financial year and R41 million in 2024/25 to approximately R3 million in 2025/26, representing a reduction of about 92%.

This substantial decline reflects the tangible impact of strengthened internal controls, improved verification procedures, and targeted anti-fraud interventions. It also indicates that the Fund’s corrective measures are beginning to close systemic gaps that were previously exploited for criminal activities.

A central component of the Fund’s reform programme has been the introduction and expansion of biometric identity management controls, which represent a significant advancement in safeguarding high-risk system processes. Implemented in October 2025, these controls use unique physical identifiers, such as fingerprint or other biometric data, to verify the identity of officials accessing critical systems and performing sensitive transactions. Unlike traditional password-based systems, which can be shared, stolen, or manipulated, biometric controls ensure that access is strictly linked to an individual user, thereby significantly reducing the risk of unauthorised system entry.

In addition, the biometric system creates a detailed and tamper-resistant audit trail, allowing every action within high-risk functions, such as changes to banking details or payment processing, to be traced back to a specific individual. This has strengthened accountability, improved oversight, and enhanced the Fund’s ability to investigate irregularities.

The system also reinforces segregation of duties by ensuring that different stages of a transaction are handled by distinct, verified individuals, thereby reducing opportunities for collusion or internal fraud. Since the implementation of biometric controls, the Fund has reported no incidents of fraudulent banking-detail changes, highlighting the effectiveness of this technology in mitigating one of the most significant historical risk areas.

In addition to biometric enhancements, the Fund has strengthened its audit and monitoring systems to detect irregular transactions in real time, improved verification processes for beneficiaries and banking details, and introduced digital platforms to reduce reliance on manual processing, which is inherently more vulnerable to manipulation.

These reforms directly respond to audit findings that identified weaknesses in documentation, control processes, and payment verification. The Fund has also intensified collaboration with law enforcement authorities and financial institutions to ensure that fraud cases are thoroughly investigated and prosecuted.

The Compensation Fund has made notable progress not only in detection but also in recovery of misappropriated funds. Through coordinated efforts with banking institutions and the Asset Forfeiture Unit, the Fund has recovered approximately R46 million linked to fraudulent activities.

In addition, preservation orders have been secured in nine finalised cases, with a combined value of R22.9 million, ensuring that funds linked to criminal activities are frozen and safeguarded pending legal processes. These recovery efforts form a critical part of restoring financial integrity and ensuring that stolen resources are returned for their intended purpose, supporting injured workers and their dependents.

Ms Molisane issued a strong warning to individuals involved in fraudulent activities against the Fund, stressing that such actions constitute not only financial misconduct but also a direct attack on vulnerable workers and their families.

She emphasised that the fund would continue to pursue offenders through criminal, civil, and administrative channels, working closely with institutions such as the South African Police Service, the Directorate for Priority Crime Investigation, the National Prosecuting Authority, the Financial Intelligence Centre, and the Asset Forfeiture Unit to ensure that justice is served.

The Department reiterated its zero-tolerance stance, affirming that fraud against the Compensation Fund undermines social protection systems and will not be tolerated under any circumstances.

The fund confirmed that fraud cases are actively under investigation, matters are being referred for prosecution, and civil recovery processes are ongoing to reclaim misappropriated funds. These actions are part of a broader effort to strengthen consequence management, reinforce accountability, and rebuild institutional credibility.

While acknowledging ongoing challenges, including historical audit disclaimers and legacy system weaknesses, the fund emphasised that sustained and targeted reforms are being implemented to stabilise and modernise the Fund.

Ms Molisane reaffirmed the Department’s commitment to restoring public confidence, highlighting that transparency, accountability, and sustained corrective action are central to rebuilding trust.

The Compensation Fund emphasised that its core mandate remains unchanged: to protect workers injured on duty, ensure timely compensation and medical support, and safeguard public resources for their intended beneficiaries. Every reform currently being implemented is directed at strengthening these objectives and ensuring that the Fund operates with integrity, efficiency, and accountability.

The Compensation Fund will continue to enhance its systems, strengthen oversight over high-risk processes, and work collaboratively with law enforcement and other stakeholders to prevent, detect, and respond decisively to fraud. The ongoing reforms highlight a clear commitment to protecting the dignity, livelihoods, and rights of workers, while ensuring that public funds are managed responsibly and transparently in the service of the South African public.

The Compensation Fund reaffirms its unwavering commitment to confronting fraud with urgency, firmness, and transparency. The Fund will continue to strengthen its control environment, intensify detection capabilities, and pursue all available legal avenues to ensure that those responsible for wrongdoing are held fully accountable. At the same time, every reform and intervention remain firmly grounded in the Fund’s core purpose: to protect the rights, dignity, and livelihoods of injured workers and their dependents.

The Fund is resolute in restoring and maintaining public confidence and will not relent in its efforts to safeguard public resources and ensure that every rand serves its intended purpose.