The Financial Intelligence Centre (FIC) has issued a directive to crypto asset service providers to implement the recommendations of the Financial Action Task Force (FATF) to monitor domestic and cross-border transfer of crypto assets.
Under the directive, service providers will be required to obtain, hold and transmit certain information for crypto asset transfers to enable them to identify suspicious and unusual transactions and detect possible terrorist financing, proliferation financing and financing of persons.
The directive also enables the service providers to freeze crypto assets and file reports to the FIC.
This follows a risk assessment by the watchdog, including its sector risk assessments and the national terrorist financing risk assessment, which found trends indicating that crypto-asset transfers are being used to evade sanctions.
“The directive applies to all crypto transactions regardless of the amount…. The accountable institution would still have to obtain and record information … and transmit the information in respect of the originator and beneficiary to the recipient [service provider],” the directive reads.
“However, if there is a suspicion of money-laundering, terrorist financing or proliferation financing in respect of such a transaction, the accountable institution must verify the information pertaining to the originator.”
The directive applies to all crypto transactions regardless of the amount.
— FIC
The directive also calls for enhanced due diligence, calling on service providers to determine which factors make a crypto asset transfer higher risk and apply enhanced measures to such crypto asset transfers.
It said these factors may include instances in which the transaction is unusual for the client type, when funds are coming from or going to an unhosted wallet and when crypto assets are sent to or received from high-risk or adverse media-related counterparty service providers.
The South African Revenue Service (Sars) is also doubling its staff complement in the area, focusing on enforcing disclosures of crypto asset transactions as part of its wider push to rake in billions of rand said to be owed to the fiscus across the economy by errant taxpayers.
The agency told Business Day last year that it was scrutinising offshore investments made in this area and was working with the Reserve Bank in this regard while also mining crypto data to identify high-risk material transactions and noncompliance.
Sars has also prioritised encouraging crypto traders to take advantage of the agency’s voluntary disclosure programme.
Crypto is becoming more mainstream in South Africa.
Discovery Bank in November announced plans to add crypto trading in more than 50 crypto assets in partnership with Luno, South Africa’s leading crypto platform.
Available data suggests that one in 10 people holds crypto assets in the country, with South Africa’s regulation leading in the region and aligning with global norms.
“Given the nature of crypto asset transfers and the speed thereof, [service providers] are discouraged from adopting end-to-end manual screening measures and are strongly encouraged to automate the monitoring of transactions,” the directive reads.
“[Service providers] should consider the use of blockchain analytics to monitor transactions across a blockchain to identify possible suspicious and unusual transactions.”
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