Starting Monday, 9 September 2024, South African banks will cease processing electronic funds transfer (EFT) payments and collections within the Common Monetary Area (CMA), Cape {town} Etc reports.
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This region includes South Africa, Namibia, Lesotho, and Eswatini and operates under a shared monetary policy.
In the CMA, each country uses its own currency, but the South African rand is legal tender across all member states.
Other currencies, like the Lesotho loti, Namibian dollar, and Swazi lilangeni, are pegged to the rand.
This arrangement has allowed for the processing of low-value cross-border payments through South Africa’s domestic retail payment system, simplifying transactions, including debit orders for businesses serving clients in neighbouring countries.
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However, this system did not comply with international anti-money laundering standards. Handling cross-border payments as domestic transactions violated Anti-Money Laundering and Combating of Financing of Terrorism (AML/CFT) regulations.
To address these issues, regulators in CMA countries have decided to switch to a regional payment infrastructure for low-value cross-border transactions. Consequently, South African banks will stop handling these EFT payments and collections. From 9 September, South African account holders will no longer be able to make or receive EFT payments with account holders in other CMA countries.
The South African Reserve Bank (SARB) explained that this change will impact low-value EFTs as well as debit and credit payments.
‘Our payment system and processes must be regularised to enhance compliance with international standards,’ the SARB stated. This move aims to prevent misuse of EFT payments for money laundering and improve the detection of such activities.
The change also supports South Africa’s goal to exit the Financial Action Task Force (FATF) greylist by January 2025. The SARB noted, ‘Regularising these low-value retail payments will help us to achieve our goal of exiting the FATF greylist by January 2025.’
From 30 September, 2024, financial institutions will also need to change how they handle debit orders. Debit orders from CMA countries must be initiated from an account in the respective CMA country. This adjustment is intended to protect customers and ensure that central banks and regulatory authorities in each country can address any problematic debit order practices more effectively.
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