Net1 under FBI investigation

South Africa's Net1 is under investigation by the US Justice Dept and FBI.

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JOHANNESBURG - South Africa's Net 1 UEPS Technologies Inc (UEPS.O) said on Tuesday the US Department of Justice is investigating whether the company had violated provisions of the Foreign Corrupt Practices Act, sending its shares down 53 percent to a life low.

The Johannesburg-based company said it received a letter from the DOJ on 30 November informing it that the department and the FBI are investigating whether the company had made corrupt payments to South African government officials to secure a contract with the South African Social Security Agency (SASSA).

One of the company's units won the contract from SASSA in January making it the sole provider of social welfare distribution services in South Africa.

The agencies will also investigate if Net 1 violated federal securities laws in connection with statements made in its SEC filings regarding the SASSA contract.

The company also received a letter from the US Securities and Exchange Commission on an investigation initiated against it, Net 1 said in a regulatory statement.

Net 1 said it intends to cooperate fully with the DOJ and the SEC on the investigations.

The company, which is the sole distributor of the social grants in South Africa had won the R10 billion Social Security Agency contract.

ABSA's subsidiary AllPay was also in the running for the contract and was very unhappy when it lost it.

It then took the matter to court.

The judge ruled that the tender process was invalid and illegal but didn't rule against the contract because of its magnitude and importance in terms of the social grant distribution.

15 million people get paid under the system.

The US Justice Department and the FBI have now decided to do its own investigation.

Stuart Theobald of Intelidex explained, "Net1 is an American listed company, it moved its primary listing from Johannesburg to The NASDAQ about a decade ago. Because it is listed there, it is subject to the Foreign Corrupt Practices Act, which an incredibly tough piece of legislation that American companies are subject to that says, "if you bribe someone overseas, it doesn't matter where, you are still breaking the law in America."