South Africa's New Regulatory Framework For Alternative Remittance Providers: What Businesses Need To Know

The Financial Surveillance Department of the South African Reserve Bank (“FinSurv”) has released a comprehensive draft framework for the regulation of Authorised Alternative Remittance Providers (“ARPs”).This framework is designed to bring alternative, non-bank remittance channels such as hawala, Hundi, and other informal value transfer systems under formal regulatory oversight. The move aims to enhance financial inclusion, ensure compliance with anti-money laundering (“AML”) and counter-financing of terrorism (“CFT”) laws, and align South Africa with international standards set by the Financial Action Task Force (“FATF”).

The ARP framework is grounded in the Currency and Exchanges Act, 1933, and the Exchange Control Regulations, 1961. FinSurv is the designated authority for administering exchange controls and supervising ARPs for compliance with the Financial Intelligence Centre Act, 2001 (“FIC Act”). The framework also incorporates recent FATF recommendations, emphasizing a risk-based approach and proportionate measures to support financial inclusion while maintaining robust AML/CFT controls.

Eligibility Requirements

To qualify as an ARP, an applicant must be a South African-domiciled limited liability company registered with the Companies and Intellectual Property Commission. Both newly established businesses and existing unsanctioned remittance operators may apply for authorisation. However, all shareholders and beneficial owners must demonstrate clean criminal and compliance records and satisfy FinSurv's minimum requirements before approval can be granted.

Permitted Remittance Channels and Transaction Limits

The framework authorises several remittance channels, each subject to specific transaction limits. ARPs may conduct both outward and inward cross-border transfers for individual clients, with a cap of R5,000 per transaction and R15,000 per client per month. Physical cash transport is also permitted, allowing ARPs to use approved couriers-such as taxi, bus, or truck drivers-to carry up to R25,000 in Rand notes per trip to SADC countries. Value Transfer Services for outward remittances are similarly permitted, subject to the same R5,000 per transaction and R15,000 per month limits. To facilitate operations, ARPs may settle outstanding balances with their foreign agents up to R100,000 per transaction. FinSurv may also consider and approve additional channels or mechanisms upon application.

Prohibited Activities

The framework imposes strict prohibitions on certain activities. ARPs are not permitted to engage third-party local field agents; all operations must be managed by direct employees or beneficial owners. The use of virtual assets, including cryptocurrencies, is strictly forbidden. ARPs are also prohibited from issuing loans, purchasing debts, or providing any unauthorised financial services. Partnerships or transactions with other local legal persons or ARPs are not allowed, and domestic money or value transfers fall outside the scope of the ARP authorisation.

Minimum Capital Requirements

ARPs are required to maintain unimpaired capital in a segregated bank account. The minimum capital requirement is set at R50,000 or 10% of projected monthly remittance volume, whichever is greater, and may rise to R500,000 for larger operators. FinSurv retains the discretion to adjust these requirements based on an assessment of the operator's risk profile and operational scale.

Operational Governance Requirements

ARPs must adhere to robust operational governance standards. Client funds must be strictly segregated from other business activities, and all client transactions require regular reconciliation and reporting. Staff must receive annual training on exchange control and AML/CFT obligations to ensure ongoing awareness and compliance. Additionally, comprehensive records of all transactions and operations must be maintained for a minimum of five years.

AML/CFT and Sanctions Compliance Obligations

Compliance with anti-money laundering, counter-financing of terrorism and sanctions requirements are central to the ARP framework. ARPs must screen all employees and clients against targeted financial sanctions lists. They are required to implement a robust Risk Management and Compliance Programme, which will be subject to FinSurv review and approval. Ongoing reporting obligations include the submission of suspicious and threshold transaction reports to the Financial Intelligence Centre.

The Application Process

The application process for ARP authorisation involves several stages. Applicants must first submit a detailed application form along with comprehensive supporting documents, including business plans, ownership structures, compliance policies, and financial projections. FinSurv will then evaluate the application, conducting management interviews and fit-and-proper assessments of key personnel. Upon satisfactory review, a conditional approval letter is issued, providing the applicant with a six-month window to meet any outstanding requirements. Once all conditions are satisfied, final approval is granted, the authorisation is published in the Government Gazette, and a formal letter of authority is issued to the ARP.

Ongoing Reporting Obligations

Once authorised, ARPs face ongoing reporting obligations to FinSurv. On a monthly basis, detailed transaction reports must be submitted using prescribed templates. Annually, ARPs are required to submit audited financial statements, confirmations of staff qualifications, and AML/CFT risk returns. Biannual updates are also required, covering compliance officers, authorised signatories, business addresses, and bank account statements.

Supervision and Enforcement

FinSurv retains broad powers to inspect ARP operations, require production of records, and enforce compliance. Non-compliance may result in warnings, audits, suspension, or revocation of ARP status, and potential legal action under the FIC Act and Exchange Control Regulations.

Key Takeaways

The ARP framework represents a significant step towards formalising alternative remittance services in South Africa. It offers a pathway for legitimate operators to enter the formal financial system, thereby supporting financial inclusion whilst ensuring regulatory compliance. However, businesses should be aware that strict eligibility, governance, and reporting requirements apply, with significant penalties for unauthorised or non-compliant activity. Those considering ARP status should prepare for a rigorous application process, ongoing compliance obligations, and close regulatory scrutiny. For further details and guidance on the application process and compliance expectations, businesses are encouraged to consult with us.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.