South African Reserve Bank Moves to Regulate Cross‑Border Payment Intermediaries
The South African Reserve Bank (Sarb) has released a draft policy aimed at tightening oversight of payment transactions that route through offshore merchants. The initiative follows a noticeable rise in cross‑border payment brokerage activity, where South African‑based intermediaries aggregate and acquire payments for foreign sellers of goods, services, and digital products.
Why the SARB is Acting Now
Although these intermediaries are not classified as acquirers, they operate under sponsorship agreements with authorised domestic acquirers. Because they fall outside the current regulatory perimeter, the SARB warns that they can obscure the true nature of transactions, creating several risks:
- Inaccurate merchant classification due to limited visibility of the ultimate merchant or sub‑merchant.
- Potential circumvention of anti‑money laundering (AML), know‑your‑customer (KYC), and counter‑terrorist financing (CTF) obligations.
- Undermining of balance‑of‑payments reporting and increased exposure to international transaction fees on purely domestic purchases.
The bank’s National Payment Systems Department (NPSD) drafted the policy after observing that payments for locally supplied services—such as email hosting or accommodation—are increasingly being processed as cross‑border flows when the issuing or acquiring entity is not registered in South Africa.
Key Provisions of the Draft Policy
The draft, open for public comment until 17 July 2024, sets out several requirements designed to bring cross‑border payment facilitators under the SARB’s supervisory framework:
- Sponsor approval: A domestic acquirer wishing to sponsor a cross‑border payment intermediary must obtain written consent from the NPSD before the arrangement can commence.
- Operational compliance: Intermediaries must adhere to the operational and compliance standards set by the SARB’s Financial Surveillance Department (FinSurv), mirroring the obligations already imposed on licensed acquirers.
- Transaction limits for residents: Building on a December 2023 circular, the draft reiterates that payments from South African residents to international merchants for e‑commerce purchases should not exceed R50,000 per transaction unless specific approval is granted.
- Transparency obligations: Sponsors must retain full records of the underlying merchant identity and ensure that transaction data is accessible for regulatory review.
Context: Remittance Flows and Broader Payment Reforms
The SARB’s focus on payment intermediaries coincides with its review of cross‑border limits announced in the 2024 national budget. In March 2024, the bank published nine draft circulars that:
- Raised the ceiling for import, service, or subscription payments made via credit or debit cards from R50,000 to R100,000 per transaction.
- Increased the cap on various non‑resident payments (e.g., sponsorship, office storage, demurrage) from R100,000 to R200,000 per transaction.
- Standardised the processing time for cross‑border transit trade transactions to four months, irrespective of the foreign payer’s jurisdiction.
These adjustments aim to reduce administrative burden while preserving safeguards against illicit finance. The SARB, together with the South African Revenue Service (SARS) and the Financial Intelligence Centre (FIC), intends to enhance monitoring to deter money laundering, terrorist financing, and tax evasion.
Implications for Stakeholders
For domestic acquirers, the new sponsor‑approval step adds a compliance layer but also offers a clearer pathway to legitimately partner with offshore facilitators. Payment intermediaries will need to invest in KYC/AML infrastructure and maintain detailed transaction logs to meet FinSurv standards.
Consumers may see more transparent fee structures, as the policy seeks to prevent the masking of domestic purchases as international transactions that attract higher charges. Meanwhile, migrant‑focused remittance providers such as Mukuru, Sikhona, and Mama Money—key players in the SADC corridor—will continue to operate under the existing remittance framework, which the SARB estimates moved from R6 billion in 2016 to R19 billion in recent years, with Zimbabwe, Lesotho, Malawi, and Mozambique accounting for roughly 90 % of formal flows.
Next Steps
The SARB invites industry participants, consumer groups, and other interested parties to submit comments on the draft policy by the July 17 deadline. Feedback will shape the final regulation, which is expected to be gazetted later in 2024. Stakeholders are encouraged to review the full draft documents available on the SARB’s website and to consider how the proposed changes align with their risk‑management and compliance programmes.
By tightening oversight of cross‑border payment intermediaries, the South African Reserve Bank seeks to preserve the integrity of the national payment system, protect consumers from hidden fees, and reinforce South Africa’s commitment to global AML and CTF standards.
