Big EFT payment change from South African banks here today

Today, 9 September, is the final day that South African banks will process domestic electronic funds transfer (EFT) credit payments and EFT debit collections to and from Lesotho, Eswatini and Namibia.

These countries, alongside South Africa, form part of the Common Monetary Area (CMA), which links the four countries into a monetary union where a single monetary policy prevails.

The CMA has historically facilitated seamless cross-border transactions due to a shared monetary policy and the use of the South African rand as the region’s common currency.

However, treating these transactions as domestic payments has been deemed non-compliant with international regulations.

Therefore, this significant change is necessary to comply with international anti-money laundering and counter-terrorism financing (AML/CFT) standards.

To address this issue, regulators within the CMA have implemented new measures for cross-border payments, including EFTs and debit orders. 

Starting on 9 September, low-value cross-border transactions will be processed through a regional infrastructure payment system, eliminating the need for South African banks to handle them domestically.

This change will have direct implications for South African account holders. They will no longer be able to make EFT payments to accounts in other CMA countries or receive EFT payments from these countries. 

“To enhance compliance with international standards, our payment system and processes must be regularised,” the South African Reserve Bank explained. 

“Doing so will, along with other benefits, prevent criminals from having easy access to EFT payments to launder funds and ensure this misuse can be identified more effectively when it occurs.”

The SARB explained that these transactions will now be considered cross-border and subject to enhanced due diligence requirements.

It said the shift to a regional payment system is essential for South Africa to maintain compliance with international standards and prevent the misuse of EFTs for money laundering activities. 

This measure is also a crucial step towards addressing the recommendations of the Financial Action Task Force (FATF) and exiting the FATF greylist by January 2025.

South Africa was placed on the FATF’s so-called “grey list” in 2023 after the watchdog found deficiencies in the country’s ability to tackle illicit financial flows and terrorism financing.

The FATF gave South Africa until 31 January 2025 to address these shortfalls. This includes meeting all 11 of the FATF’s effectiveness measures to combat money laundering and the financing of terrorism.

This change being made to EFT payments in the CMA is, therefore, part of South Africa’s efforts to remove itself from the grey list.

The SARB said regularising these low-value retail payments will help us to achieve our goal of exiting the FATF greylist by January 2025.

Further to this, the Reserve Bank has also announced changes to debit orders within the CMA. 

As of 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 will have to be initiated from an account domiciled in the respective CMA country. 

The SARB said these measures will provide customers with greater protection as domestic central banks and conduct authorities will have in-country recourse against any unscrupulous debit order practices. 

“The SARB and its National Payment System Department are cognisant that these changes will have an impact on certain customers’ banking experience, potentially impacting the processing time as well as the cost of these transactions,” the central bank said.

“The SARB and the CMA Cross-border Payments Oversight Committee (CPOC), a structure established by CMA central bank governors to oversee and coordinate various cross-border payment initiatives, are working to ensure that retail customers and businesses are not adversely affected by these regulatory changes.”