As South Africa enhances its regulatory framework for cryptocurrencies, Crypto Asset Service Providers (Casps) must act promptly to avoid compliance violations. From 30 April 2025, Directive 9 will implement stricter regulations regarding the monitoring and reporting of crypto asset transactions. A key component of this directive is the ‘travel rule,’ which mandates that client information be included with all domestic and international crypto transfers. This information must encompass the sender’s complete name, identification or passport number, date and place of birth, residential address (if “readily available”), and wallet address for transactions above R5,000.
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The greylisting of South Africa by the Financial Action Task Force (FATF) has prompted an increase in compliance regulations. Directive 9 directly addresses this concern, placing the responsibility on Casps to ensure that crypto transactions are not involved in money laundering, terrorism financing, or any other unlawful financial activities.
This includes the ‘ordering Casp’ (the service provider where the cryptographic sender holds their account), the ‘recipient Casp’ (the provider receiving the crypto assets from the ordering Casp on behalf of the customer), and any intermediary Casp (a provider that exchanges and receives crypto assets on behalf of either the ordering Casp or recipient Casp or another intermediary Casp).
Why Casps should take note
In October 2022, the Financial Sector Conduct Authority (FSCA) officially classified crypto assets as financial products, and by December 2022, Casps were integrated into South Africa’s regulatory framework as accountable institutions. As a result, these service providers are now obligated to comply with the Financial Intelligence Centre Act (Fica) regulations to maintain legal compliance.
Casps are now tasked with executing customer due diligence and validating a customer’s identity prior to transaction processing. This responsibility is crucial as the nature of crypto assets enables rapid and seamless international money transfers, complicating the identification of individuals behind transactions, which in turn opens avenues for criminal exploitation.
To evade financial penalties and potential reputational harm, Casps should establish comprehensive governance and compliance protocols, including real-time checks against global watchlists, live customer verification through video interactions, and advanced biometric identification (requiring users to blink, smile, or perform specific movements during the scanning process). Nonetheless, the verification process does not conclude once a customer is verified.
Casps should consistently monitor transactions for irregular patterns and behaviors that may suggest illicit activities. These regulatory mandates require Casps to maintain more detailed and comprehensive records of client transactions and develop thorough risk assessment frameworks to evaluate customer risk from the onboarding phase onward. For instance, external factors like geopolitical events could prompt certain individuals or groups to utilize crypto for funding illegal operations, as these transactions are typically more challenging to trace compared to standard banking methods.
As part of their risk assessment protocols, Casps should clearly outline the conditions under which a cross-border crypto asset transfer might be rejected or paused, along with the necessary follow-up actions in such cases.
While many have welcomed this directive, concerns have been voiced regarding the significant privacy governance challenges posed by the travel rule. The Protection of Personal Information Act (POPIA) restricts the transfer of personal data beyond South Africa’s borders; however, the international nature of crypto transactions may necessitate sharing personal information with entities in nations lacking robust privacy safeguards. Furthermore, POPIA requires that only data necessary to complete a transaction be collected and processed, which may conflict with the stipulations of the travel rule.
As additional measures are implemented to ensure the crypto industry operates within regulated frameworks, both Casps and other financial institutions require ample support to keep up with evolving compliance requirements and to mitigate operational risks.
VOCA, backed by SearchWorks, has been designed to comply with Fica, AML, CFT, FATF, and POPIA regulations, making it a reliable solution for ensuring that compliance with the travel rule aligns with other legal obligations. This automated compliance platform is tailored to assist businesses in efficiently meeting governance standards by integrating real-time identity validations, risk assessments, and transaction monitoring to combat fraud, money laundering, and regulatory infractions.
A noteworthy new feature of VOCA is its ongoing monitoring capability, which tracks client profiles daily and notifies users of any changes that could indicate compliance risks. Additionally, VOCA’s automated reporting ensures that any suspicious activities are documented and reported as mandated by regulatory authorities.
The launch of Directive 9 represents a significant shift in South Africa’s regulatory landscape for Casps. With non-compliance now carrying the risk of administrative penalties under Fica, Casps must act swiftly to adhere to these new requirements.
Sameer Kumandan, MD of SearchWorks.
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