Big EFT changes for South Africa are here
South African account holders can no longer make EFT payments to account holders in other Common Monetary Area (CMA) countries, including Eswatini, Lesotho, and Namibia.
From Monday, 9 September, the processing of domestic EFT—including credit payments and EFT debit collections—to and from Lesotho and Eswatini will no longer be possible.
That said, the Bank of Namibia extended the effective date of stopping processing cross-border EFT payments to 30 September 2024.
“Due to regulatory changes, the Bank of Namibia and the CMA Cross-border Oversight Committee will discontinue EFTs for payments to and from Eswatini, Lesotho and Namibia,” said Nedbank Private Wealth.
“This decision was made by CMA regulators earlier this year, and the Payments Association of South Africa is coordinating efforts to meet this deadline.”
The CMA is a monetary union. Although each country issues its currency, the South African Reserve Bank (SARB) governs all four currencies, meaning the rand can also be used in each country.
The arrangement has a few benefits, such as allowing CMA countries to access South African financial markets and simplifying cross-border electronic fund transfers.
Previously, low-value cross-border payments within the CMA have been processed through South Africa’s domestic retail payment system.
Nevertheless, treating cross-border payments as domestic transactions is not compliant with international Anti-Money Laundering and Combating of Financing of Terrorism (AML/CFT) standards.
A major problem in the previous system was that it considered payments from Lesotho, Namibia, and Eswatini to originate from South Africa. This made it challenging to find the origin and sender of funds and stop money laundering.
Thus, the CMA countries are changing cross-border payments, with low-value cross-payments now handled through a regional infrastructure payment system.
South African banks are thus no longer processing electronic EFT payments and collections within the CMA, and customers will also no longer be able to receive EFT payments from other CMA countries.
Reserve Bank explains
The South African Reserve Bank (SARB) said that the change will treat low-value EFTs and debit and credit payments as cross-border transactions and subject them to stricter diligence requirements.
In doing so, criminals will no longer be easily allowed to use EFT payments to launder funds, and any misuse will be identified more effectively.
The move forms part of South Africa’s plan to get off the Financial Action Task Force’s grey list.
In early 2023, South Africa was placed on the greylist due to inefficiencies in tackling Money Laundering and the Financing of Terrorism. This has increased costs for banks and asset managers across South Africa.
This ending of EFTs across the CMA is part of South Africa’s efforts to address several FATF recommendations.
“Regularising these low-value retail payments will help us to achieve our goal of exiting the FATF greylist by January 2025,” it said.
The SARB also said that the changes will also affect debit order treatment.
From 30 September 2024, financial service providers can no longer 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,” said the SARB.
These measures are set to protect customers as domestic central banks and conduct authorities will have in-country recourse against unethical debit order uses.
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