Cryptocurrency exchanges and wallet providers in South Africa have warned customers that they will have to provide additional information whenever they make a transfer from today.
This is part of an effort for South Africa to exit the Financial Action Task Force (FATF) greylist by complying with its “Travel Rule” for virtual assets.
The FATF greylisted South Africa on 24 February 2023 for falling short on its eleven measures of a country’s effectiveness in combating money laundering and the financing of terrorism.
Its Travel Rule requires financial institutions, including those who deal in virtual assets, to provide relevant originator and beneficiary information alongside transactions.
The Financial Intelligence Centre (FIC) issued Directive 9 last year, instructing crypto asset service providers that they will be required to comply with the Travel Rule from 30 April 2025.
Binance, VALR, Luno, AltCoinTrader, and other crypto asset service providers (CASPs) in South Africa recently notified their customers about the change.
“In South Africa, the Directive and Travel Rule requires a CASP to gather details about the recipient of a crypto transaction,” Luno explained.
It must then exchange information with the CASP on the other side of the transaction and, under certain circumstances, verify the provided information.
“If this sounds kind of familiar, the Travel Rule has applied to financial institutions like banks for over twenty years. Banks use the SWIFT system to interact with one another for this purpose,” said Luno.
Since mid-April, VALR has been warning customers that they must provide beneficiary information when initiating any crypto withdrawal to a non-VALR address.
“As the Travel Rule applies to all withdrawal amounts, regardless of value, the required information must be provided each time — unless the address is saved to your Address Book,” VALR said.
“To streamline future withdrawals, we recommend saving your frequently used wallet addresses with the new required information.”
VALR highlighted that South Africa is not the only country with the Travel Rule in place for cryptocurrency transactions. Some others include the USA, the UK, Zambia, and Hong Kong.
Binance said users will be asked to provide the sender’s information when any amount of crypto is deposited into their accounts.
Similarly, users will be asked to provide the beneficiary’s information when sending any amount of crypto out of their Binance accounts.
“The transaction may be delayed or may not be processed if users do not provide the necessary information,” Binance warned.
“In some cases, the crypto assets may be required to return to the originator. Please ensure to provide all the required information during the deposit and withdrawal procedures.”
VALR said it partnered with Sumsub as its regulatory compliance partner to meet its Travel Rule obligations. Luno said it was working with a Notabene.
Regarding self-custody, VALR said customers could still withdraw to their private wallets like Metamask or Ledger.
“You’ll need to indicate that it’s a self-hosted wallet during the withdrawal process,” VALR said.
Travel Rule welcomed in South Africa, with concerns
Altify founder and CEO Sean Sanders previously told MyBroadband it was inevitable that the Travel Rule would become mandatory in South Africa as the country seeks to get off the FATF’s greylist.
“At Altify, we fully support regulatory developments that protect consumers and prevent money laundering and terrorist financing,” Sanders said.
However, Sanders expressed surprise that the FIC set a R5,000 reporting threshold. “It may be the lowest out of any country worldwide,” he said.
“This will place extra compliance costs on investment platforms like us at Altify, which may result in slower transaction processing times and an overall worse user experience for our users relative to platforms operating outside of South Africa,” he warned.
Only the sender’s and beneficiary’s full names are required for transactions below R5,000. Much stricter requirements are placed on transactions over this minimum amount.
If the sender is a person, the CASP must transmit and store their full name, ID or passport number, date of birth (if not an SA resident), and residential address or country of birth if an address is not readily available.
For senders who are businesses or other legal persons, the CASP must transmit and store their registered name, entity registration number, and registered address.
The CASP must also keep record of the sender’s crypto wallet address and any additional crypto asset account number they might use on their platform.
Sending and receiving CASPs must verify the provided information if the transaction value exceeds R5,000.
They must verify the data regardless of amount if there is suspicion of money laundering, terrorist financing, or the illegal funding of weapons of mass destruction.
Recipient crypto asset service providers must also take reasonable measures to identify cross-border crypto asset transfers that lack the required information.
The FIC’s directive said this may include post-event or real-time monitoring, where feasible.
Accepting transfers from private wallets, which the FIC calls “unhosted wallets,” requires CASPs to develop, document, maintain, and implement effective risk-based policies and procedures.
These must include how and when additional information on the unhosted wallet is obtained if the CASP determines there is a higher money laundering, terrorist financing or proliferation financing risk.
South African reporting threshold extremely low
The South African Travel Rule reporting threshold converted to US dollars is roughly $270.
In comparison, Japan’s reporting threshold for cryptocurrency transactions is around $3,000, Singapore’s is $1,115, and Canada’s is $710.
“I believe it would be more sensible to have a reporting requirement in crypto that matches the reporting thresholds for cash transactions in South Africa. It would be illogical for these amount to be different,” Sanders said.
Luno said that although some challenges remain regarding the Travel Rule, its objective of mitigating the risk of money laundering and terrorist financing using crypto is the right one.
“Sending crypto to a wallet address without any further information can be pretty scary for customers,” Luno stated.
“Including the details of the recipient when sending crypto should feel quite familiar for most of our customers.”
By introducing additional checks around transactions, Luno said the risk of sending crypto to an incorrect wallet address is reduced.
“We believe that the Travel Rule will help provide regulatory clarity and general trust in crypto asset transactions, ensuring broader and faster adoption,” said Luno.
“The decision to extend the Travel Rule to CASPs signifies an acknowledgement that the crypto industry has earned its place in today’s financial system.”
Luno said this also presents an opportunity to continue shaping that financial system in future.
“At Luno, where our mission is to upgrade the world to a better financial system, we’re confident that we’re on the right path to achieve this.”