South Africa’s crypto asset service providers face tightened transaction rules. The Financial Intelligence Center (FIC) of South Africa has reportedly issued a draft directive to make sure that accountable institutions that provide crypto asset services follow up to and implement the Financial Action Task Force’s (FATF) recommendations.
South Africa’s Crypto Asset Service Providers
In recent developments, South Africa’s crypto asset service providers are bracing for significant changes as regulatory authorities tighten transaction rules in line with global standards.
The Financial Intelligence Centre (FIC) has issued a directive requiring these providers to transmit and verify specific identity information during cryptocurrency transactions. This move aims to address concerns raised by the Financial Action Task Force (FATF), particularly regarding adherence to the “Travel Rule” for virtual assets like cryptocurrency.
The FATF’s Travel Rule mandates financial institutions, including virtual asset providers, to furnish relevant originator and beneficiary information for transactions.
South Africa’s action to implement this rule is part of its broader strategy to address the FATF’s greylisting, a status it has held since February 2023 due to inadequate compliance with FATF recommendations. Other African countries on the FATF’s grey list include Nigeria, Mali, Burkina Faso, Cameroon, Mozambique, Namibia, Tanzania, and Kenya.
Key Provisions of the Directive
The directive, dated April 18, 2024, mandates ordering, intermediary, and recipient crypto asset service providers to transmit comprehensive identity information. This includes full name, ID or passport number, wallet address, date and place of birth, and residential address.
Notably, ordering providers must transmit the sender’s identity to the recipient, while intermediary providers ensure the transmission of sender and beneficiary information.
Additional Requirements and Compliance Measures
For cross-border transfers below R5000 from grey-listed jurisdictions, beneficiary providers must verify the beneficiary. Moreover, in transactions involving “unhosted crypto wallets,” also known as self-custody wallets, providers are obligated to develop and implement risk-based policies and procedures.
These policies detail how additional information about the wallet will be obtained to mitigate money laundering risks.
Enforcement and Implications
Non-compliance with the directive could result in administrative sanctions for crypto asset service providers. The regulatory landscape is evolving rapidly, and firms must adapt to meet these stringent requirements to avoid penalties and maintain regulatory compliance.
The Financial Sector Conduct Authority (FSCA) has concurrently released a list of 75 approved institutions to operate as crypto asset service providers, indicating a proactive approach to regulatory oversight.
Navigating Compliance in a Changing Landscape
As South Africa endeavors to address regulatory concerns and improve its standing with international standards bodies like the FATF, crypto asset service providers must prioritize compliance with the new directive.
This entails implementing robust systems and processes to ensure the seamless transmission and verification of identity information during cryptocurrency transactions. By doing so, these providers can navigate regulatory changes effectively while fostering trust and integrity in the crypto ecosystem.
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