Crypto transactions face tighter regulatory scrutiny. (Image created with GenAI)
The Financial Intelligence Centre (FIC) is calling for public comment on a draft guidance note to help crypto traders implement the travel rule for digital asset deals, which came into effect in April last year.
This is the latest in a series of regulatory moves to clamp down on the use of digital currency to finance terrorism or launder money.
Recently, the South African Revenue Service implemented two new crypto reporting standards, and the South African Reserve Bank is moving to bring cross-border crypto flows under exchange control rules.
FIC’s guidance note explains how sellers of digital gold can implement its 2024 Directive 9, which emanates from standards set by the Financial Action Task Force (FATF). These standards aim to combat money-laundering and terrorist financing by making crypto transactions easier to trace.
Under the travel rule, crypto exchanges must collect and share identifying information about both sender and recipient, including names, passport or ID numbers, addresses and account numbers – similar to what banks already record.
Crypto-currencies’ decentralised nature and anonymity makes them attractive for illicit activity, according to research from the Catholic University of Colombia – Universidad Católica de Colombia.
Accounts can be opened anonymously with no central registry tracking ownership, making it harder for authorities to freeze funds linked to criminal activity, the research found.
Crypto travel rule explained. (Image created with GenAI)
The authors also note that blockchain transactions can sometimes be traced, but investigators often need cooperation from third-party platforms, given that records sit across decentralised ledgers in multiple jurisdictions.
Terrorist organisations are also actively exploring crypto to move money, with some websites already collecting donations in Bitcoin, notes a 2024 paper in the Journal of Terrorism Studies.
South Africa was placed on the FATF grey list in February 2023 for weaknesses in prosecuting money-laundering and terrorist financing, and was removed last October.
This followed a raft of reforms to strengthen its anti-money-laundering framework, improve financial intelligence capabilities and increase law enforcement action against financial crime.
Finance minister Enoch Godongwana stated during the National Budget speech last week that National Treasury will shortly publish draft regulations under the Currency and Exchanges Act to include crypto assets in its capital flow management regime.
Government aims to govern the cross-border movement of money and complement existing rules against money-laundering and fraud through this legislative change.
Godongwana’s statement comes despite pending court matters over whether forex regulations apply to digital money.
Implementing the travel rule is complex. AML Watcher noted in January that almost two-thirds of countries with applicable laws haven’t yet issued enforcement actions to ensure compliance, based on FATF 2025 data.
“This enforcement gap partly reflects the recency of many laws and the complexity of operationalising travel rule requirements, especially given interoperability challenges and resource constraints in supervisory agencies,” it says.
A snapshot of how far countries are with implementing travel rules for crypto. (Source: AML Watcher)
Barriers include incompatible systems, unhosted wallets with no intermediaries, limited regulatory expertise and cross-border complexity.
FATF recommends reporting any transaction above 1 000 euros or dollars – roughly R19 000 or R16 350 at current rates. The US threshold is $3 000 (R49 000), while Europe applies the standard to every transaction.
Under the FIC’s directive, there is no minimum threshold, though requirements increase above R5 000 to include passport or ID numbers and addresses in addition to names and account numbers.
The rule gives authorities the ability to freeze assets, block sanctioned transactions and strengthen AML oversight. Regulators also expect proactive client screening against blacklists – also an FIC requirement.
“Regulators now view unscreened travel rule data as a serious weakness in anti-money-laundering efforts, especially in international and crypto-currency transactions,” AML Watcher adds.
