Draft PCC 118A – Interpretation of money or value transfer service providers

FIC

Financial Intelligence Centre

DRAFT PUBLIC COMPLIANCE COMMUNICATION

DRAFT PUBLIC COMPLIANCE COMMUNICATION 118A FOR CONSULTATION

GUIDANCE ON THE INTERPRETATION OF MONEY OR VALUE TRANSFER SERVICE PROVIDERS, IN TERMS OF THE FINANCIAL INTELLIGENCE CENTRE ACT AND THEIR REGISTRATION, REPORTING AND SUPERVISION

31 March 2025

PCC REVISION NOTE

Save for new sections in paragraphs 2.7 and 2.22, this public compliance communication (PCC) 118A follows closely the layout and content presented in PCC 118, which was issued for consultation in December 2022.

PCC 118A provides guidance on the registration, reporting and supervision of money value and transfer services (MVTS) providers, under item 19 to Schedule 1 of the Financial Intelligence Centre Act (FIC Act) that engage in cross-border activity and/or domestic business activity.

PCC SUMMARY

Item 19 to Schedule 1 of the FIC Act designates “a person who carries on the business of a money or value transfer provider”, referred to as a money or value transfer services (MVTS) provider, as an accountable institution.

An MVTS provider includes both formal and informal types of persons and entities. Formal cross-border MVTS providers include, but is not limited to, authorised dealers in foreign exchange (such as banks), and authorised dealers in foreign exchange with limited authority. Informal MVTS providers include, but are not limited to, hawala dealers and cash aggregators.

All item 19 accountable institutions, regardless of whether they are formal or information MVTS providers, must register with the Centre. This must be done separately for each type of MVTS business activity they perform and conduct whether as a cross-border or domestic MVTS provider.

THE AUTHORITATIVE NATURE OF GUIDANCE

The Financial Intelligence Centre (Centre) provides the guidance contained in this draft PCC in terms of its statutory function in terms of section 4 (c) of the FIC Act read together with Regulation 28 of the Money Laundering and Terrorist Financing Control Regulations (Regulations) issued in terms of the FIC Act.

31 March 2025 – Draft public compliance communication 118A guidance on the definition regarding the money or value transfer service provider in terms of Schedule 1 of the Financial Intelligence Centre Act.

Section 4(c) of the FIC Act empowers the Centre to provide guidance in relation to a number of matters concerning compliance with the obligations in terms of the FIC Act. Guidance provided by the Centre is the only form of guidance formally recognised in terms of the FIC Act and the Regulations issued in terms of the FIC Act. Accordingly, guidance provided by the Centre is authoritative in nature and must be considered when interpreting the provisions of the FIC Act or assessing an accountable-institution's compliance with obligations imposed on it by the FIC Act.

It is important to note that enforcement action may emanate as a result of non-compliance with the FIC Act in areas where there has been non-compliance with the guidance provided by the Centre. Where it is found that an accountable institution has not followed guidance which the Centre has issued, the institution must be able to demonstrate that it has nonetheless complied with the relevant obligation under the FIC Act in an equivalent manner.

DISCLAIMER

The publication of a PCC concerning any particular issue, as with other forms of guidance which the Centre provides, does not relieve the user of the guidance from the responsibility to exercise their own skill and care in relation to the users' legal position. The Centre accepts no liability for any loss suffered as a result of reliance on this publication.

COPYRIGHT NOTICE

This PCC is copyright. The material in a PCC may be used and reproduced in an unaltered form only for personal and non-commercial use within your institution. Apart from any use permitted under the Copyright Act 1978, (Act 98 of 1978) all other rights are reserved.

OBJECTIVE

This PCC provides clarity on the interpretation of "a person who carries on the business of a money or value transfer provider" as designated in item 19 of Schedule 1 to the FIC Act.

31 March 2025 – Draft public compliance communication 118A guidance on the definition regarding the money or value transfer service provider in terms of Schedule 1 of the Financial Intelligence Centre Act.

Further, the PCC highlights vulnerabilities faced by MVTS providers and risk indicators that can be considered when determining money laundering, terrorist financing and proliferation financing (ML, TF and PF) risks presented in their client engagements.

Importantly, this PCC provides an additional guidance on the registration, reporting and supervision of an MVTS provider, under item 19 to Schedule 1 of the Financial Intelligence Centre Act (FIC Act), that engage in cross-border activity and/or domestic business activity.

1. INTRODUCTION

1.1. Money value transfer services (MVTS) providers are accountable institutions as listed in item 19 of Schedule 1 to the FIC Act. The FIC Act does not provide a definition of MVTS or an MVTS provider, and the purpose of this PCC is to clarify the Centre's interpretation of these terms.

1.2. Schedule 1 to the FIC Act was amended and took effect from 19 December 2022. Through these changes, item 19 of Schedule 1 to the FIC Act was amended. The previous wording included "a person who carries on the business of a money remitter". The amended wording refers to "a person who carries on the business of a money or value transfer provider".

1.3. The purpose of this PCC is to clarify the Centre's interpretation of item 19 of Schedule 1 of the FIC Act, in relation to MVTS.

1.4. MVTS providers may face the risk of being abused for terrorist financing, money laundering, and proliferation financing and as such must adopt measures to mitigate these risks.¹

31 March 2025 – Draft public compliance communication 118A guidance on the definition regarding the money or value transfer service provider in terms of Schedule 1 of the Financial Intelligence Centre Act.

Financial Action Task Force definition of MVTS providers

1.5. The Financial Action Trask Force (FATF) defines MVTS as follows:²

"Money or value transfer services (MVTS) refers to financial services that involve the acceptance of cash, cheques, other monetary instruments or other stores of value and the payment of a corresponding sum in cash or other form to a beneficiary by means of a communication, message, transfer, or through a clearing network to which the MVTS provider belongs. Transactions performed by such services can involve one or more intermediaries and a final payment to a third party and may include any new payment methods. Sometimes these services have ties to particular geographic regions and are described using a variety of specific terms, including hawala, hundi, and fei-chen."³

2. THE CENTRE'S INTERPRETATION OF MVTS PROVIDERS

2.1. An MVTS provider is defined in item 19 of Schedule 1 to the FIC Act as "a person who carries on the business of a money or value transfer provider". This definition consists of different terminology, which is discussed below.

General terminology used

2.2 "A person" which includes both natural persons and legal persons.

2.3 "Carries on the business" this term is not defined in the FIC Act. The ordinary meaning of the term, within the context of the FIC Act is applied. The use of this term implies that the MVTS is provided as a service to clients.

2.4 "Business" is that of a commercial activity, as opposed to a charitable undertaking.

² See the Annexure to this Draft PCC 118A and the narrative therein.

³ Note that cheques are no longer accepted as payment instruments in South Africa. The term "new payment methods" encompasses more than just crypto asset service providers and may include all other forms of financial technology developments. Further note that crypto asset service providers are specifically included in terms of item 12 and item 22 of Schedule 1 to the FIC Act, as accountable institutions.

31 March 2025 – Draft public compliance communication 118A guidance on the definition regarding the money or value transfer service provider in terms of Schedule 1 of the Financial Intelligence Centre Act.

Specific terminology used

2.5 "Money or value transfer" which includes providing financial services that involve:

2.5.1 The acceptance of cash, electronic funds, other monetary instruments or other stores of value

2.5.2 The payment of a corresponding sum (less fees and charges) in cash, electronic funds, other monetary instruments or other stores of value to a beneficiary by means of a communication, message, or electronic transfer or through a clearing network to which the MVTS provider belongs.

2.5.3 Transactions performed by such services providers can involve one or more intermediaries and a final payment to a third party and may include any new payment methods.

2.6 The concept of MVTS is therefore broad and includes both formal and informal types of services, as well as cross-border and domestic money or value transfers.

Formal cross-border MVTS providers

2.7 It is the Centre's view that the following entities fall within the definition of cross-border MVTS providers:

2.7.1 Banks being authorised dealers in foreign exchange, including restricted authorised dealers in foreign exchange

2.7.2 Authorised dealers in foreign exchange with limited authority

2.7.3 Financial services providers that have a direct reporting dispensation under the Exchange Control Regulations

2.7.4 The South African Post Office.

Informal or alternative cross-border MVTS providers

2.8 It is the Centre's view that informal or alternative cross-border MVTS, include the transfer of value through alternative remittance systems that do not necessarily make

31 March 2025 – Draft public compliance communication 118A guidance on the definition regarding the money or value transfer service provider in terms of Schedule 1 of the Financial Intelligence Centre Act.

use of licensed or authorised financial institutions. These are persons or entities which provide informal MVTS, and which sometimes have ties to particular geographic regions and are described using a variety of specific terms. Such informal or alternative activity includes, but is not limited to:

2.8.1 Hawala dealers (hawaladars)

2.8.2 Hundi

2.8.3 Fei-chen

Other cross-border MVTS providers

2.9. It is the Centre's view that other cross-border MVTS include cross-border cash aggregators (e.g. where the cash aggregator provides the service of collection and aggregation of a client's cash and payments into their client's or third parties account)

2.10 Informal, alternative and other cross-border MVTS providers fall within the ambit of item 19 of Schedule 1 to the FIC Act and therefore must register with the Centre and comply with the FIC Act requirements.

Domestic MVTS providers

2.11 It is the Centre's view that the following entities fall within the definition of domestic MVTS providers:

2.11.1 Banks that have an agency arrangement as contemplated by the Prudential Authority (PA) of the South African Reserve Bank (SARB) Directive 9 of 2022⁴

2.11.2 Mutual banks that have an agency arrangement as contemplated by SARB PA Directive 3 of 2022⁵

31 March 2025 – Draft public compliance communication 118A guidance on the definition regarding the money or value transfer service provider in terms of Schedule 1 of the Financial Intelligence Centre Act.

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2.11.3 Non-bank payment institutions⁶ that provide payment activities in the draft SARB Directive in respect of specific payment activities within the national payment system as listed in table A below.

2.11.4 Any other new payment method providers for domestic transactions

2.11.5 Cash aggregators (e.g. where the cash aggregator provides the service of collection and aggregation of a client's cash and payments into their client's or third-party's account)

2.11.6 Cash couriers within the Republic of South Africa (including cash in transit providers)

2.11.7 Non-bank mobile money or value transfer providers (such as airtime credit service providers of airtime transfers)

2.11.8 Informal domestic payment providers, this category is wide and may include all persons that provide services that fall within the definition of MVTS as described in paragraphs 2.1 to 2.5 above. The onus is on the entity to evidence that they do not fall within this category, where such assertions are made.

Consultation notes – Scope of MVTS providers:

Commentators are requested to provide their views on the following aspects:

1) Whether there are any other entity types that **should be included** as item 19 domestic MVTS providers.

2) Whether there are any entity types that **should not be included** as item 19 domestic MVTS providers.

3) The item 19 domestic bank MVTS providers only concern those banks and mutual banks that have agency arrangement as contemplated in the SARB PA directives 3 and 9 of 2022. Such item 19 MVTS provider banks and mutual

31 March 2025 – Draft public compliance communication 118A guidance on the definition regarding the money or value transfer service provider in terms of Schedule 1 of the Financial Intelligence Centre Act.

banks will monitor and report transactions that arise out of the agency arrangement.

4) Should the item 19 domestic MVTS agents of the domestic MVTS banks and mutual bank be regarded as separate accountable institutions and required to register with the Centre separately?

5) Where the item 19 domestic MVTS agents of a bank or mutual bank are considered to be separate accountable institutions, should they report to the Centre through a delegated structure of the item 19 MVTS bank or mutual bank that is their principal?

6) Advise whether non-bank mobile money or value providers (such as airtime credit service providers of airtime transfers) should be included as a MVTS providers?

7) Commentators are requested to provide their views on which of the activities as listed in the MVTS providers categories are covered by item 23 of the Schedule 1 to the FIC Act (item 23 of Schedule 1 to the FIC Act includes – “A clearing system participant as defined in section 1 of the National Payment System Act, 1998 (Act 78 of 1998) that facilitates or enables the origination or receipt of any electronic funds transfer and or acts as an intermediary in receiving or transmitting the electronic funds transfer.”)

Provide detailed responses with motivations.

31 March 2025 – Draft public compliance communication 118A guidance on the definition regarding the money or value transfer service provider in terms of Schedule 1 of the Financial Intelligence Centre Act.

Payment activities

2.12 It is the Centre's view that persons who provide the payment activities as listed in Table A below, fall within the ambit of item 19 of Schedule 1 to the FIC Act and are designated as domestic MVTS providers⁷:

Table A:

[tbl-0.html](tbl-0.html)

Note that some payment activities may fall within the item 23 of Schedule 1 to the FIC Act.

31 March 2025 – Draft public compliance communication 118A guidance on the definition regarding the money or value transfer service provider in terms of Schedule 1 of the Financial Intelligence Centre Act.

31 March 2025 – Draft public compliance communication 118A guidance on the definition regarding the money or value transfer service provider in terms of Schedule 1 of the Financial Intelligence Centre Act.

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31 March 2025 – Draft public compliance communication 118A guidance on the definition regarding the money or value transfer service provider in terms of Schedule 1 of the Financial Intelligence Centre Act.

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[tbl-2.html](tbl-2.html)

Consultation notes – Payment activities:

Commentators are requested to provide comments on whether persons that provide the payment activities as listed in Table A above, should fall within the ambit of domestic MVTS providers. Provide detailed responses with motivations.

Commentators are requested to provide views on what other payment activities fall within the ambit of MVTS.

Exclusions from the MVTS providers designation

2.13 It is the Centre’s view that the following entities do not fall within the definition of MVTS providers:

2.13.1 Payment clearing house system operators, as defined in the National Payments System Act Act 78 of 1998 (NPS Act) as this service does not provide a money value or transfer service to an end-user client. The services provided is rather to accountable institutions.

2.13.2 System operators as defined in the NPS Act

2.13.3 Designated settlement system operator and ‘Reserve Bank settlement system as defined in the NPS Act.

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Consultation note – MVTS providers exclusions:

Commentators are requested to provide views on what entity types should fall outside of the ambit of MVTS providers.

Agency in MVTS provider arrangements

2.14 MVTS providers that make use of agents must ensure that the agents are included in their anti-money laundering, counter terrorist financing and counter proliferation financing programmes, and that the agents are monitored for compliance with the programmes.

2.15 The requirements of MVTS agency for banks is discussed further in Directive 9 of 2022, issued by the PA.

2.16 The requirements of an MVTS agency for mutual banks is discussed further in Directive 3 of 2022, issued by the PA.

2.17 Transactions that occur using agency arrangements as provided for in the SARB’s Directive 3 of 2022 (mutual banks) and Directive 9 of 2022 (banks), must be clearly identifiable as such, and where resultant reportable activity occurs, the reports must be filed with the Centre under the item 19 domestic MVTS bank or mutual bank registration with the Centre.

Registration considerations for MVTS providers

2.18 The Centre advises that all MVTS providers (including cross-border and domestic) are required to be registered in terms of item 19 of Schedule 1 to the FIC Act, as a cross-border or domestic MVTS provider, depending on their activity, on the Centre’s registration and reporting platform.

2.19 There are scenarios where an entity falls within two or more items under Schedule 1 to the FIC Act, and as such is required to register under each item in which they fall,

31 March 2025 – Draft public compliance communication 118A guidance on the definition regarding the money or value transfer service provider in terms of Schedule 1 of the Financial Intelligence Centre Act.

referred to as dual registration. For example, a bank that is an authorised dealer in foreign exchange must be registered under item 6 and item 19 of Schedule 1 to the FIC Act.

2.20 Further, item 19 of Schedule 1 to the FIC Act, has different sub-categories on the Centre's registration and reporting platform, depending on whether the entity is a domestic MVTS provider or a cross-border MVTS provider, that entity is required to register separately for each sub-category.

**Consultation notes – Domestic MVTS agents requirement to register:**

1. Commentators are requested to provide views on whether banks' MVTS agents (as provided for in terms of the SARB Directive 9 of 2022) must register separately as accountable institutions?

2. Commentators are requested to provide views on whether mutual banks' MVTS agents (as provided for in terms of SARB Directive 3 of 2022) must register separately as accountable institutions?

**Reporting to the Centre**

2.21 A cross-border MVTS provider must report electronic cross-border transactions by submitting international funds transfer reports (IFTRs) in terms of section 31 of the FIC Act through item 19 accountable institution registration only. This applies to banks as authorised dealers in foreign exchange, conducting cross-border transactions as well. Future reports not submitted under the correct Schedule 1 item on the Centre's registration and reporting platform will be rejected. Refer to Guidance note 9

2.22 Domestic and cross-border MVTS providers must submit to the Centre cash threshold reports (CTRs) in terms of section 28 of the FIC Act, suspicious and unusual transaction and activity reports (STRs and SARs) in terms of section 29 of the FIC Act and terrorist property reports (TPRs) in terms of section 28A of the FIC Act, under the correct cross-border and domestic MVTS item 19 category and not under another Schedule item number on the Centre's registration and reporting platform.

31 March 2025 – Draft public compliance communication 118A guidance on the definition regarding the money or value transfer service provider in terms of Schedule 1 of the Financial Intelligence Centre Act.

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Supervisory approach

2.23 Cross-border MVTS providers are supervised by SARB's Financial Surveillance department (FinSurv) in terms of Item 2(c) of Schedule 2 to the FIC Act and are required to adhere to the authorisation requirements that apply.

2.24 Formal domestic MVTS providers that are banks and their MVTS agents are supervised by the PA in terms of Item 2(b) of Schedule 2 to the FIC Act and are required to adhere to the registration requirements that apply⁸.

3. POTENTIAL ANTI-MONEY LAUNDERING, COUNTER TERRORIST FINANCING AND COUNTER PROLIFERATION FINANCING RISK INDICATORS

3.1. An MVTS provider must conduct money laundering, terrorist financing and proliferation financing (ML, TF and PF) risk assessment on an entity wide level, and at a client level. Due to operating in the industry, MVTS providers would be in the best position to determine where the potential ML, TF and PF vulnerabilities are. For further information on risk determination, please refer to Guidance Note 7A (revised).

Product and service risk indicators

3.2 Possible indicators of heightened risk of ML, TF and PF in the business offering, and the abuse of this offering of an MVTS provider, can include, but is not limited to:

3.2.1 The product inadvertently enables anonymity

3.2.2 The transaction limit of a product is high or there is no limit

3.2.3 The product enables fast cross-border transfer of funds

3.2.4 The product can be exchanged for another type of value, such as prepaid gift card

3.2.5 Rapid in and out of transactions across an account.

3.2.6 Several individuals deposit money into a single bank account on a frequent basis, followed by international transfers outward

⁸ Once the NPSD framework is finalized. Non-bank payment institutions will be supervised by the FIC up until the NPSD framework is finalized.

31 March 2025 – Draft public compliance communication 118A guidance on the definition regarding the money or value transfer service provider in terms of Schedule 1 of the Financial Intelligence Centre Act.

3.2.7 Transactions conducted in a manner that falls beneath the cash reporting threshold and an attempt is made to avoid the reporting obligation (structuring)

3.2.8 Currency transfers to high-risk jurisdictions

3.2.9 Implausible explanation regarding source of the funds

3.2.10 Transactions not consistent with the client's usual foreign business transactions.

3.2.11 Numerous cash withdrawals near the border

3.2.12 Client in possession of large amounts of foreign currency without a reasonable explanation.

3.2.13 Usage of false identity documents to send money and to claim cash by someone using false documentation to identify themselves as the beneficiary.

3.2.14 The transfer of currency to high-risk jurisdictions without reasonable explanation and transactions are not consistent with the customer's usual foreign business dealings.

3.2.15 The exchange of large amounts of currency in low denomination notes for higher denominations.

3.2.16 The purchase of currency with large cash amounts.

3.2.17 Client's personal remittance has no link to the country where he/she sends/receives the money, or no apparent family or business links and they cannot adequately explain why money is sent to or received from that country.

3.2.18 Client makes use of different money remittance businesses for transactions and money is received from different money remittance companies.

3.2.19 Funds are transferred by the same client on the same day to several money transmitter locations to purportedly same or different recipients.

3.2.20 There is an unusual request(s) made by the client for collection or delivery.

3.2.21 The geographic location to or from which the payment is made is of importance, there is a heightened risk of MVTS provider products and services being misused for ML, TF and PF.

31 March 2025 – Draft public compliance communication 118A guidance on the definition regarding the money or value transfer service provider in terms of Schedule 1 of the Financial Intelligence Centre Act.

Client risk indicators

3.3 In addition to the factors stated in FIC Guidance note 7A (revised), there are specific client-level indicators that are applicable to the MVTS sector. These factors include:

3.3.1 The client resides or operates a business which is an unusual distance away from where the MVTS transacts

3.3.2 Client networks are evident from transaction patterns (e.g. various originators sending funding to the same beneficiary etc.)

3.3.3 Client does not want to disclose information on originator

3.3.4 Client operates a cash intensive business which does not seem to be legitimate

3.3.5 Nature and volume of transactions does not match historic transaction patterns i.e. larger transactions done during a high-risk season e.g. when illegal drugs are produced

3.3.6 The transactions do not match the client historic patterns

3.4 Accountable institutions may also refer to sector risk assessments as published by FinSurv and SARB for further indicators.

4. POTENTIAL ANTI-MONEY LAUNDERING, COUNTER TERRORIST FINANCING AND COUNTER PROLIFERATION FINANCING RISK INDICATORS RELATING TO THE USE OF MVTS AS A CORRESPONDENT

4.1 Where an accountable institution conducts business through a correspondent MVTS provider, the following indicators may be considered when assessing the ML, TF and PF risks:

4.1.1 Nature and size of the MVTS

4.1.2 The risk profile of the MVTS clients

4.1.3 The complexity of the MVTS business and clients

4.1.4 Whether the MVTS is based in a country of concern due to the levels of ML, TF, and PF, including considering whether the country has a weak AML, CTF and CPF regime

4.1.5 The transaction limits that apply and whether they are below reporting threshold

4.1.6 The volumes and values of the MVTS transactions

31 March 2025 – Draft public compliance communication 118A guidance on the definition regarding the money or value transfer service provider in terms of Schedule 1 of the Financial Intelligence Centre Act.

5 CONSULTATION

5.1 Before issuing guidance to accountable institutions, supervisory bodies and other persons regarding their performance, duties and obligations in terms of the FIC Act or any directive made in terms of the FIC Act, the Centre must in accordance with section 42B of the FIC Act:

5.1.1. Publish a draft of the guidance by appropriate means of publication and invite submissions.

5.1.2. Consider submissions received.

5.2 Commentators are invited to comment on the draft guidance by submitting written comments via the online comments submission link only. Any questions or requests relating to this draft PCC 118A may be sent to the Centre only at consult@fic.gov.za. Submissions will be received until Friday, 25 April 2025, by close of business.

6 COMMUNICATION WITH THE CENTRE

6.1 The Centre has a dedicated compliance contact centre geared to assist accountable institutions to understand their registration obligations in terms of the FIC Act. Please call the compliance contact centre on 012 641 6000 and select option 1.

6.2 Compliance queries may also be submitted online by clicking on: http://www.fic.gov.za/ContactUs/Pages/ComplianceQueries.aspx Compliance queries – FIC or by visiting the Centre’s website and submitting an online compliance query.

Issued by:

The Acting Director

Financial Intelligence Centre

31 March 2025

31 March 2025 – Draft public compliance communication 118A guidance on the definition regarding the money or value transfer service provider in terms of Schedule 1 of the Financial Intelligence Centre Act.

Annexure A

FATF Glossary to the FATF Recommendations adopted 16 February 2012, and last updated February 2025 (accessible here)

[tbl-3.html](tbl-3.html)

FATF Guidance for 'A Risk-Based Approach for Money or Value Transfer Services' issued February 2016, Paragraph 11 provides as follows:

11. There is a range of participants involved in the provision of MVTS. For the purpose of this Guidance, the following terminology is used:

- MVTS provider: Any natural or legal person who is licensed or registered to provide MVTS as a business, by a competent authority, including through agents or a network of agents.⁹ This also includes HOSSPs meeting the aforementioned criteria.

- Hawala and other similar service providers ("HOSSP"): Generally referred to as entities that provide MVTS, particularly with ties to specific geographical regions or ethnic communities, which arrange for transfer and receipt of funds or equivalent value which is settled through trade, cash and/or net settlement over an extended period of time, rather than simultaneously with the transfer.¹⁰

- Agent: Any natural or legal person providing MVTS on behalf of an MVTS provider, whether by contract with or under the direction of the MVTS provider.¹¹

31 March 2025 – Draft public compliance communication 118A guidance on the definition regarding the money or value transfer service provider in terms of Schedule 1 of the Financial Intelligence Centre Act.