In the field of verification, 'fronting' is a high-risk factor. Allowing 'fronting' practices in any form is a clear circumvention of the Codes Of Good Practice and may not only tarnish the good standing of an organisation, but put the reputation of the verification agency, and analyst alike, at risk. It is the responsibility of all Verification Analysts, as the last port-of-call, to stop those attempting to commit fraud. The verification industry as a whole, has to be extremely vigilant in order to identify 'fronting' indicators when verifying evidence presented.
The amended BEE Act is clear on what constitutes fronting. It is classified as 'an attempted and/or intentional circumvention of the Amended BEE Act and the Amended Codes of Good Practice'. A Verification Analyst is responsible for identifying the difference between a measured entity claiming compliance based on misrepresentation and an unintended circumvention owed to loopholes arising from unclear legislation.
The Amendment Act provides further guidance on Offences in Section 13O:
A person commits an offence if that person knowingly;
a. Misrepresents, or attempts to misrepresent, the Broad-Based Black Economic Empowerment status of an enterprise;
b. Provides false information, or misrepresents information, to a B-BBEE verification professional in order to secure a particular Broad-Based Black Economic Empowerment status, or any benefit associated with the compliance with his Act;
c. Provides false information, or misrepresents information, relevant to assessing the Broad-Based Black Economic Empowerment status of an enterprise to any organ of state or public entity; or
d. Engages in a fronting practice.
A B-BBEE verification professional, or any procurement officer or other official of an organ of state or public entity, who becomes aware of the commission of, or any attempt to commit, any offence referred to in subsection and fails to report it to an appropriate law enforcement agency, is guilty of an offence.
Below, Mansingh discusses how you might identify fronting and how you can minimise the risk factors.Source of information: www.thedti.gov.za | Amendment Bill gazetted 27 February 2014