3 February 2023
Eventually, in June of 2020, South Africa's Finance Minister Tito Mboweni suggested changes to the nation's Financial Intelligence Centre Act (FICA or FIC Act). With this proposal, the government of South Africa hopes to bring its Cryptocurrency regulations up to speed and in compliance with the FATF's Guidelines for Virtual Asset Service Provider (VASP) regulations. Everyone of those world's 200 countries is required to follow the global rulebook established by the FATF Standards, which will be amended in June 2019 to include the so-called FATF Travel Rule, which mandates that VASPs communicate transmittal data with counterparts.
As suggested by the Intergovernmental Fintech Working Group's (IFWG) Crypto Assets Regulatory (CAR) Working Group, South Africa should gradually bring Cryptocurrency inside the regulatory scope by regulating CASPs. Aligning precisely with the FATF Virtual Asset Guidelines, the Intergovernmental Fintech Working Group (IFWG) published its Position Paper on Crypto Assets on April 14, 2020. In accordance with the FATF VASP concept, the study coined the term "Crypto Asset Service Provider" (CASP). The paper states that CASPs must adhere to AML/CFT measures established by the Financial Action Task Force (FATF), such as Recommendation 16 on the Travel Rule.
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IFWG’s Position Paper on Cryptocurrency Assets
After the March 2020 publication of the 58-page guideline on Cryptocurrency regulation, Mr. Mboweni recommended revisions to assist govern CASPs. It has not yet been approved. In its new Position Paper on Crypto Assets, the Intergovernmental Fintech Working Group i.e., IFWG Crypto's Assets Regulatory Working Group (CAR WG) proposes more than 30 steps to bring the Cryptocurrency industry into compliance with international AML as well as CFT regulations. The study classifies Cryptocurrency exchanges into six distinct CASPs in South Africa, all of which must join with monetary regulators and adhere to the same standards as "accountable institutions" under current law. The South African Reserve Bank (SARB), Treasury, and Financial Intelligence Centre are only some of the organizations represented on the IFWG and CAR WG, two policymaking groups established by the country's monetary authorities (FIC).
South Africa’s CAR Align with FATF Recommendations 15 and 16
Since South Africa is a signatory to the Financial Action Task Force (FATF) and the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), a local organization modeled after the FATF, it must follow the FATF's 40+9 Recommendations. As part of South Africa's 4th Mutual Evaluation Report (MER), the earliest from 2009, the Financial Action Task Force (FATF) as well as the Economic and Social Advisory Multilateral Group (ESAAMLG) visited the nation in 2019 and were scheduled to present their findings at the FATF session in June 2020. The MER evaluation has indeed been postponed till October 2020 as a result of the global COVID-19 epidemic.
The CAR WG regulation report specifically expands upon 2 of the FATF's greatest important recommendations for dealing with digital assets:
- Changes made in 2019 to Recommendation 15 (New Technologies) involve Cyber Asset Service Providers (CASPs) and virtual resources.
- In 2020, the "travel rule" will require nations to mandate that their VASPs provide recipient as well as provider transferal data to counterparts in accordance with Recommendation 16 (Wire Transfers).
Exchanges in Japan, Korea, Taiwan, and Canada are all presently integrating Sygna Bridge's network alliance for exchanges, one of many private solutions in advancement for Recommendations of 16.
South Africa’s FATF “Travel Rule” for CASPs
The FATF has mandated that all 200+ member nations have frameworks in place by June 2020 to guarantee that their VASPs adhere to Recommendation 16's "travel rule." By adding sections in the IFWG report acknowledging this obligation and mirroring the G20 AML watchdog's formal guidelines almost word for word, South African officials have proven their desire to ensure CASPs comply with the R.16 update. CASPs on both ends of a Cryptocurrency exchange transmission must gather and store "necessary and correct" details on the sender and receiver of the assets, and make that data available to the appropriate authorities upon request. The same goes for PII, which must be sent from CASP originators to CASP beneficiaries.
What Personality Identifiable Information (PII) should CASPs Share?
The sending VASP is obligated to provide the receiving VASP with the following sender details: the sending VASP's name or perhaps customer name, the sending VASP's account number used to process the money transfer, as well as the sending VASP's unique identifiers either a home address, national identity number, as well as date and place of birth. The originating VASP will need to know the Beneficiary's name or the customer and the Beneficiary's account number in order to complete the operation. Several mechanical as well as confidentiality adherence issues arise with the travel rule in Recommendation 16. CASPs will need to address these issues to ensure their services are available to their customers. Furthermore, if it is adopted, it will aid in the Crypto industry's efforts to safeguard its clients against fraud and attacks and attract institutional as well as popular participants.
Disclaimer: The author’s thoughts and comments are solely for educational reasons and informative purposes only. They do not represent financial, investment, or other advice.