A key component of this is the travel rule, an initiative which mandates that client details accompany domestic and cross-border crypto transfers. This information will include the originator’s full name, identity or passport number, date and place of birth, residential address, and wallet address for transactions over USD 273 (ZAR 5000).
As South Africa’s greylisting by the Financial Action Task Force (FATF) has triggered a wave of stricter compliance regulations, Directive 9 is a direct response, placing responsibility on Crypto Asset Service Providers to ensure crypto transactions are not linked to money laundering, terrorism financing, or other illicit financial activities. This includes the ordering CASP (where the sender of the crypto assets has their account), the recipient CASP (the one that receives the crypto assets from the ordering CASP on behalf of the customer) and any intermediary CASP (the one that transmits and receives crypto assets on behalf of an ordering CASP or a recipient CASP or another intermediary CASP). The new rules will be introduced as of April 30, 2025.
Through this initiative, CASPs have a responsibility to do customer due diligence and verify a customer’s identity before processing transactions. This process is especially important because crypto assets were developed in order to enable the quick transfer of funds across borders, which makes it harder to determine who is behind the transactions. At the same time, in order to avoid financial penalties and possible reputational damage, CASPs need to put robust governance and compliance measures in place, like real-time checks against global watchlists, live customer verifications, video calls, or improved biometric verification.
Furthermore, CASPs must also monitor transactions regularly by looking for unusual patterns and behaviours that could be linked to illicit activities. These requirements demand that CASPs need to maintain more detailed and extensive records of client transactions, as well as implement comprehensive risk assessment frameworks to evaluate client risk during onboarding. At the same time, as part of their risk assessment framework, CASPs need to have a clear understanding of when to reject or suspend a cross-border crypto asset transfer and what follow-up action should be taken when this happens.
As more and more measures are put in place in order to ensure that the crypto world operates within well-regulated frameworks, CASPs and other FIs and businesses will need to stay ahead of changing compliance obligations and reduce operational risk. The implementation of Directive 9 marks a critical shift in South Africa’s overall regulatory framework for CASPs. With non-compliance now carrying the risk of administrative sanctions under the FIC Act, CASPs are expected to take immediate steps in order to align with these obligations.
VOCA, powered by SearchWorks, was built in order to comply with FICA, AML, CFT, FATF, and POPIA regulations to ensure that compliance with the travel rule doesn’t conflict with any other legislation. The platform is designed to optimise the manner in which businesses meet governance equirements efficiently by integrating real-time identity verifications, risk assessments, and transaction monitoring in order to prevent fraud, money laundering, and regulatory breaches.
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