Story audio is generated using AI
The South African Reserve Bank (SARB) is developing regulations for payment transactions involving offshore merchants as it seeks to curb risks such as money-laundering and breaches of cross-border laws.The Bank said on Tuesday it has noted an increase in cross-border payment facilitator activities, in which payment transactions are aggregated and acquired in South Africa for offshore merchants that sell goods or services, including digital products. Though payment facilitators are not acquirers, they operate under sponsorship arrangements with authorised domestic acquirers but are not regulated in South Africa.The Bank said there is a growing concern that payments for goods and services provided or delivered in South Africa are being processed as cross-border transactions, which occurs when the issuing or acquiring entities are not registered or incorporated in the country.This includes the cross-border acquiring of payments for domestic e‑hailing services or accommodation and the cross-border issuing of payment instruments, such as travel cards, used for domestic transactions.In a draft directive produced by its national payment system department (NPSD), the Bank says these payment models bring about efficiencies for customers and merchants, promote competition and introduce transparency, disclosure and merchant identity risks.“In certain instances, domestic acquirers may not have full visibility of the merchant or submerchant involved in a transaction, thereby increasing the risk of inaccurate merchant classification and reducing transparency across the payment chain,” says the draft, which is open for comments until July 17.“The SARB further notes that cross-border payment facilitators may be utilised to circumvent or weaken compliance with cross-border regulatory requirements, including customer due diligence, know-your-customer, anti-money-laundering, counter-terrorist financing and balance of payments reporting obligations.”The draft directive says misclassifying and processing domestic payments as cross-border transactions can restrict effective regulatory oversight of retail payments and impose undue costs on customers by charging international transaction fees for domestic goods and services.It stipulates that a domestic acquirer seeking to sponsor a cross-border payment facilitator must obtain written approval from the NPSD for the arrangement. The SARB said payment facilitators would also be required to comply with the operational and compliance requirements of its Financial Surveillance Department (FinSurv), as per a draft circular published last December which is under review following public comment.The circular requires, among other things, that payments by resident individuals for e-commerce transactions to international merchants be limited to R50,000 per transaction.Some cross-border payments involve remittances between migrants in South Africa and the Southern African Development Community (Sadc), which are dominated by nonbanking service providers such as Mukuru, Sikhona and Mama Money.A remittance assessment report published about two years ago estimated that remittances from South Africa to Sadc countries had grown threefold to R19bn in 2024 from R6bn in 2016 as Covid-19 travel restrictions pushed the move to formal routes. Zimbabwe, Lesotho, Malawi and Mozambique accounted for 90% of formal remittances in the region.In March, the SARB issued nine draft circulars for public comment giving effect to announcements in the national budget tabled in parliament the previous month, primarily on increased new limits for cross-border payments and investments by individuals in South Africa, as well as streamlining some administrative processes. The budget review said the limit for miscellaneous imports, services or subscription payments (for example, imports over the internet, services or subscriptions), made via credit or debit cards would be increased from R50,000 to R100,000 per transaction.To reduce red tape, the limit for miscellaneous payments to nonresidents, for example, for sponsorships, office and warehouse expenses, demurrage or refunds, is being increased from R100,000 to R200,000 per transaction.The time lag for residents entering into cross-border merchanting transactions will be aligned to four months irrespective of the jurisdiction of the foreign payer.The budget review said the SARB, the South African Revenue Service and the Financial Intelligence Centre would enhance supervisory oversight to ensure anti-money-laundering and the financing of terrorism and tax infringements did not occur.
