Say goodbye to old EFTs: SA's banking system braces for change

Source: The South African Reserve Bank.

To comply with anti-money laundering standards, cross-border payments will now be processed through the Southern African Development Community real-time gross settlement (SADC-RTGS), a regional payment system typically used for large, high-value transactions.

This system will also handle smaller, everyday payments - namely low-value retail payments - improving the efficiency of cross-border transactions within the CMA region.

The national currencies—Lesotho loti, Namibian dollar, and Swazi lilangeni—are pegged to the South African rand, meaning they hold the same value as the rand. But, while each country within the Common Monetary Area (CMA) has its own national currency, these are only legal tender within their borders, whereas the South African rand is accepted as legal tender across all CMA member countries.

Starting Monday, South African account holders will be unable to make EFT payments to accounts in other CMA countries, and will also not be able to receive EFT payments from countries like Namibia. Debit orders must now be initiated from accounts within their respective CMA countries.

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The South African Reserve Bank explained that debit and credit payments will be treated as cross-border transactions, necessitating more stringent due diligence measures.

"Our payment systems and processes must be aligned to enhance compliance with international standards," the Reserve Bank stated.

Key FATF compliance

These efforts are part of South Africa's response to recommendations from the Financial Action Task Force (FATF) - an international organisation established in 1989 to combat money laundering, terrorism financing, and other threats to the integrity of the global financial system.

It sets international standards and promotes the implementation of legal, regulatory, and operational measures to fight financial crime.

FATF President @ElisadeAnda addressed the @esaamlg Council of Ministers, highlighting its important work in the region and the Global Network. She also discussed the FATF priorities for her Presidency, including work to deepen support for financial inclusion. pic.twitter.com/hek1jZyRwk

— FATF (@FATFNews) August 30, 2024

The FATF monitors member countries' progress in implementing these measures and works to identify and respond to emerging risks in the financial sector. Regularising these low-value retail payments is key to South Africa's goal of exiting the FATF greylist by January 2025.

Starting 30 September 2024, therefore, financial institutions can no longer debit account holders in other CMA countries as if they were domestic customers or policyholders.

"Debit orders collected from accounts within CMA countries must be initiated from an account domiciled in the respective CMA country," it stated.

These measures aim to protect customers by ensuring domestic central banks and regulatory authorities have in-country recourse against unfair debit-order practices.