The Minister of Finance in South Africa has finally signed the proposed FICA exemption for low value cross-border money transfers which will greatly reduce the AML/CFT requirements which currently apply. This exemption comes into effect on 1st July 2015.
FICA’s control framework follows international best practice, particularly in relation to identification and verification. In respect of natural persons, financial institutions are required to obtain the client’s full names, date of birth, identity number and residential address.
This exemption will result in a reduction in the cost and less administrative work on the part of financial institutions. It will also encourage remitters currently using informal and risky channels to use formal channels thereby improving the lot of poor migrants and their families in the main corridors around South Africa i.e. Zimbabwe, Mozambique, Malawi, Lesotho, Swaziland and others. This is definitely a step in the right direction for financial inclusion of poor people in the SADC region.
According to a study conducted by FinMark Trust in 2012, about 68% of the value of remittances from South Africa are channelled through the informal cross border corridors. One of the most quoted reasons for the utilisation of the informal corridors is the KYC requirements.
FinMark Trust whose mission is to make financial markets work for the poor played a critical and pioneering role in getting this exemption passed through years of research and engagement with the South African Reserve Bank, SA National Treasury and the Financial Intelligence Centre. FinMark Trust has worked extensively on removing regulatory obstacles for the extension of financial services to low income individuals in the SADC region.