FIC issues Directive 9 re Travel Rule

FIC issues Directive 9 re Travel Rule

• 22 November 2024
• Regulatory Compliance and Legislation
• South African Accounting Academy

Summary:

The Financial Intelligence Centre (FIC) has issued Directive 9, in terms of section 43A(2) of the Financial Intelligence Centre Act, 2001 (Act 38 of 2001) (FICA), related to the travel rule for those accountable institutions that engage in crypto asset transfers.

Article:

The purpose of this Directive is to ensure that accountable institutions that provide or engage in activities of crypto asset transfers, implement the requirements of Recommendation 16 of the Financial Action Task Force (FATF) in the context of crypto asset transfers.

This Directive applies to accountable institutions listed in items 12 and 22 of Schedule 1 to the FICA that are ordering, intermediary or recipient crypto asset service providers, which facilitate or enable the origination or receipt of domestic and cross-border transfers of crypto assets or act as an intermediary in receiving or transmitting the crypto assets for or on behalf of a client.

Directive 9 was gazetted on 15 November 2024, and comes into effect on 30 April 2025.

The “travel rule” is the term used to describe the application of the FATF's Recommendation 16 requirements regarding wire transfers or electronic funds transfers to the mechanism and context of crypto asset transfers.

The travel rule relates to the transfer and/or receipt of crypto assets by accountable institutions for or on behalf of their customers, the information that must be provided alongside these transactions, and the related records that must be kept. This information, held by the ordering and beneficiary crypto asset service providers (CASPs), must be made available to appropriate authorities upon request.

The primary purpose for implementing the travel rule is to help ensure that the transfer or receipt of crypto assets via CASPs is not used for money laundering, terrorist financing and proliferation financing purposes. Also, the travel rule meets international standards for combating money laundering, terrorist financing and proliferation financing set by the FATF.

A crypto asset service provider (CASP) that fails to comply with a provision of this Directive is non-compliant and is subject to an administrative sanction in accordance with section 45C of the FIC Act.

Click here to download the 9-page Directive 9:

https://www.fic.gov.za/wp-content/uploads/2024/11/Directive-9-Travel-rule-relating-to-crypto-asset-transfers.pdf

Relevance to Auditors, Independent Reviewers & Accountants:

• FICA is yet another piece of legislation that your clients must comply with, and which you must assess compliance with.  If they don’t comply with the relevant laws and regulations, you have certain reporting obligations in terms of NOCLAR (NOn-Compliance with Laws And Regulations) – this could include reporting to management, qualifying your audit opinion, reporting a Reportable Irregularity, etc.
• As an auditor, independent reviewer and accountant, you need to be aware of directives issued by the FIC that apply to your clients.
• This directive is applicable to those clients that are accountable institutions (particularly if listed under items 12 and 22 in Schedule 1 of FICA) that provide or engage in activities of crypto asset transfers for or on behalf of their clients.

Relevance to Your Clients:

• An accountable institution (particularly if listed under items 12 and 22 in Schedule 1 of FICA) that provides or engages in activities of crypto asset transfers for or on behalf of their clients, must comply with this Directive, otherwise they could be held liable.
• As legislation, regulations and laws are continuously changing and evolving, it is of utmost importance for accountable institutions to continue to meet their FICA obligations.

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