Big EFT changes for South Africa here next week
South African banks will implement a big electronic funds transfer (EFT) payment change next week, impacting direct payments and debit orders.
The change followed the Common Monetary Area (CMA) regulators’ decision to discontinue processing EFT payments and collections within the CMA.
The CMA was enacted in July 1986 and originated from the Rand Monetary Area (RMA), which was formally established in December 1974.
The Common Monetary Area links South Africa, Namibia, Lesotho, and Eswatini into a monetary union.
Each country has the right to have a national currency. These currencies are only legal tender in their own countries. However, the South African rand is tender throughout the CMA.
These national currencies, the Lesotho loti, Namibian dollar, and Swazi lilangeni, are pegged to the South African rand. Simply put, they have the same value as the rand.
This arrangement had many benefits, including the ability for CMA countries to access the South African financial markets.
Another benefit was that it enabled and simplified cross-border electronic funds transfers without using systems like Swift.
Historically, low-value cross-border payments within the Common Monetary Area have been processed through South Africa’s domestic retail payment system.
However, treating cross-border payments as domestic transactions was not compliant with international Anti-Money Laundering and Combating of Financing of Terrorism (AML/CFT) standards.
One problem was that the current system considers payments from Lesotho, Namibia, and Eswatini to originate from South Africa.
This makes it difficult to track and trace the origin and sender of funds and prevent and address money laundering.
To address this challenge, regulators in CMA countries have announced changes to cross-border payments.
From Monday, 9 September 2024, low-value cross-payments will be handled via a regional infrastructure payment system.
Therefore, South African banks will stop processing electronic EFT payments and collections within the CMA.
South African account holders will no longer be able to make EFT payments to account holders in other CMA countries.
South Africans will also not be allowed to receive EFT payments from other CMA countries like Namibia.
The final day of processing domestic EFT, including credit payments and EFT debit collections, to and from Lesotho and Eswatini, is 9 September 2024.
The Bank of Namibia extended the effective date of stopping processing cross-border EFT payments to 30 September 2024.
South African Reserve Bank explains
The South African Reserve Bank (SARB) said the change will affect low-value EFTs and debit and credit payments.
It highlighted that these transactions will be treated as cross-border transactions and subject to greater due diligence requirements.
“Our payment system and processes must be regularised to enhance compliance with international standards,” the Reserve Bank said.
Doing so will prevent criminals from easily accessing EFT payments to launder funds and ensure that this misuse can be identified more effectively when it occurs.
This step also forms part of South Africa’s efforts to address several recommendations by the Financial Action Task Force (FATF).
The SARB said it would strengthen South Africa’s anti-money laundering, counter the financing of terrorism, and combat the proliferation financing regime.
“Regularising these low-value retail payments will help us to achieve our goal of exiting the FATF greylist by January 2025,” it said.
Banks operating in the CMA have elected to process these low-value retail payments using the regional payments infrastructure.
This infrastructure includes the Southern African Development Community real-time gross settlement (SADC-RTGS) system primarily used for high-value payments.
The Reserve Bank highlighted that the changes will also include a new approach to the treatment of debit orders.
From 30 September 2024, financial institutions will no longer be able to debit account holders in other CMA countries as domestic customers or policyholders.
“Debit orders collected from customers’ accounts within the CMA countries must be initiated from an account domiciled in the respective CMA country,” it said.
These measures will protect customers as domestic central banks and conduct authorities will have in-country recourse against unscrupulous debit order practices.
Banks warn clients about the changes
Standard Bank Namibia warned its clients about the changes to EFT transactions to South Africa, Lesotho and Eswatini introduced by the Bank of Namibia.
“This change will be effective from 9 September 2024 for Standard Bank Namibia clients,” the bank said.
“This includes processing payments via our Foreign Exchange solution and adhering to specific payment reason codes for balance-of-payments reporting.”
It said that from next week, all payments from Namibia to South Africa, Eswatini, and Lesotho will be processed via foreign exchange, i.e., SWIFT.
The Bank Windhoek said from Tuesday, 10 September 2024, internet banking payments to South Africa will be processed as cross-border payments.
“We would like to assure our customers that all the necessary system enhancements to the internet banking platform have been applied to allow for a seamless experience,” it said.
Therefore, Bank Windhoek clients can continue to make payments to South African beneficiaries using the existing beneficiaries on the Bank Windhoek Internet Banking platform.
Nedbank informed its clients that EFT could not be used by people making and receiving payments or collections to beneficiaries in a CMA country after September 2024.
“You can use our global payment platform, global transactions on the Nedbank Business Hub, or our global host-to-host solution to make and receive these payments,” it said.
It further warned that debit order collection processing will only be supported in-country and not between countries.
“Debit orders collected from accounts within the CMA will have to be initiated from an account domiciled in Namibia, Lesotho or Eswatini,” it said.
This will require access to an in-country banking service to submit debit order collections and the receivables and billing processing accounts.
Alternatively, these debtors can initiate payments from the respective CMA countries to you using a cross-border service.
Standard Bank said all payment flows between countries within the CMA will be done via the Swift platform and will no longer be processed via EFT rails.
Therefore, Swift (the Global Payment Society for Worldwide Interbank Financial Telecommunications), must be used to initiate all cross-border payments.
Absa said regulators have instructed banks to discontinue processing debit and credit EFT payments to Namibia. Credit and debit EFT payments will also be discontinued.
“If you want to continue making payments to Namibia, you can use the Swift service available through our relationship banking, international banking and foreign exchange teams,” it said.
“We understand that these changes may affect your banking experience, and we are committed to assisting you through this transition.”
FNB said due to regulatory requirements, EFT payments and collections between CMA countries will soon be discontinued.
“These payments will need to be initiated as Global Payments via Forex,” the bank told clients.
Capitec said due to a directive by the South African Reserve Bank, clients would no longer be able to receive money from or make EFT payments to certain banks in neighbouring countries.
“Capitec clients who currently receive money from, or make EFT payments to, Namibia, Lesotho and eSwatini through FirstRand, Standard Bank, Nedbank, Bank Windhoek and eSwatini Bank will no longer be able to do so,” it said.
“However, they will still be able to receive Swift payments from these banks,” Capitec added.
These changes are set to be disruptive for many businesses and families in the Southern African region.
Cross-border payments via Swift will take more time because of the increased checks and controls.
Read: Warning over ‘synthetic’ identity theft in South Africa
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