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SARB Issues Guidance to Discourage the Termination of Crypto Transactions in Banks

  • Richard Marley
  • August 19, 2022
  • 2 minutes read
  • 76
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The South Africa Reserve Bank (SARB)’s Prudential Authority has issued a guidance note to banks for processing the transactions of crypto asset service providers (CASPs)

The central bank stated that it is aware that some banks in the nation had previously chosen to end the bank/customer connection with CASPs (Crypto Assets Service Providers) in a note signed by the CEO of the Prudential Authority, Fundi Tshazibana.

The note states that the banks decided to terminate transactions linked to CASPs due to the dangers of money laundering (ML), terrorism financing (TF), and proliferation funding (PF) that come with the lack of regulatory standards in the sector.

The central acknowledges the banks’ justifications for terminating but goes on to say that banks’ risk assessments shouldn’t imply that they should try to completely avoid risk by refusing to provide any services to CASPs (also known as de-risking).

According to SARB, de-risking can endanger the nation’s financial stability. De-risking might potentially lead to financial opacity for the impacted individuals or businesses, which would make it impossible to address issues related to money laundering, terrorism funding, and proliferation finance.

“It is thus prudent for banks to be able to risk categorise CA/CASP-related clients through conducting a risk assessment which will assist banks in determining the appropriate level of ML/TF/PF risk management measures necessary, as opposed to total avoidance, in line with the application of a risk-based approach,” the central bank emphasised.

The note’s conclusion from SARB states that a choice to de-risk should only be made if the risk posed by a specific company or client is too big to adequately manage. Even in this situation, the choice must be carefully thought out and considered.

Major South African banks have in the past broken ties with CASPs, as seen by National Bank (FNB) closing accounts with LUNO and VALR, two of the country’s largest cryptocurrency exchanges, in 2020 and Standard Bank closing accounts with automated cryptocurrency arbitrage services last year.

Suggested Read: SA Banks at High Risk of Money Laundering & Terrorist Financing, Says Prudential Authority Report