South Africa’s Financial Intelligence Centre (FIC) has released a preliminary directive mandating cryptocurrency platforms in South Africa to share the identities of customers involved in cryptocurrency transactions.
The move is seen as part of South Africa’s efforts to be removed from the Financial Action Task Force (FATF) greylist, with the country aiming to comply with the ‘Travel Rule’ established for virtual assets such as cryptocurrency.
In February 2023, the Financial Action Task Force (FATF) added both South Africa and Nigeria to its ‘grey list’, a list consisting of countries under special scrutiny for failing to implement standards to prevent money laundering and terrorism financing.
Nigeria 🇳🇬, South Africa 🇿🇦 Placed under FATF Grey List – A Total of 8 African Nations Now Under Scrutiny
Interestingly, Botswana was grey listed by FATF before its removal in early 2022 after passing a virtual assets bill to regulate trading of cryptohttps://t.co/wOOrKihLyM
— BitKE (@BitcoinKE) February 28, 2023
Under the proposed new directive, signed by FIC Acting Director, Pieter Smit, South African crypto asset service providers (CASPs) would be obligated to share a significant amount of personal data of cryptocurrency senders with recipient providers.
This data would include:
- The sender’s full name
- ID or passport number
- Residential address
- Date and place of birth, and
- Wallet address
Additionally, CASPs would need to verify the information received from other providers in accordance with the FIC Act (FICA).
In cross-border transfers, senders are required to furnish full names, comprehensive information regarding both the sending and receiving crypto wallets, and the beneficiary’s name. However, for transactions below R5,000 ($271.18), verification of these details for accuracy is not mandatory unless there are suspicions of money laundering or terrorist financing.
South Africa, which has issued more than 75 licenses to crypto firms, will also require that, prior to transmitting the confidential customer data, CASPs:
- Identify the counterpart provider
- Perform due diligence on the counterparty, and
- Maintain updated due diligence records when engaging with them
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“374 licence applications have been received to date. The FSCA will continue to provide regular updates as these applications are processed and approved.” – FSCA… pic.twitter.com/GnStpzogj7
— BitKE (@BitcoinKE) April 23, 2024
This measure is intended by the FIC to:
- Assess whether the counterpart can reasonably ensure the confidentiality of the transmitted information
- Prevent engagement with illicit actors or entities as identified in a United Nations Security Council Resolution
The proposal also addresses ‘unhosted wallet transfers,’ commonly referred to as self-custody within the crypto sphere. It mandates that CASPs must establish a risk-based policy for acquiring additional information on unhosted wallets if they identify a heightened risk of money laundering, terrorist financing, or proliferation financing.
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“A crypto asset service provider that fails to comply with a provision of this Directive is non-compliant and is subject to an administrative sanction in accordance with section 45C of the FIC Act,” said the Financial Intellience Centre.
Interested parties have until May 31 2024 to comment on the proposal.
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