Exchange Control: Recent amendments to the Currency and Exchanges Manual for Authorised Dealers

As part of its review of South Africa’s exchange control rules, the Financial Surveillance Department of the South African Reserve Bank (FinSurv) from time to time issues exchange control circulars, notifying persons of changes to these rules.

24 Aug 2018 4 min read Tax and Exchange Control Alert Article

On 2 August 2018, FinSurv issued Exchange Control Circular No.12/2018 (Circular 12/2018) and on 20 August 2018, it issued Exchange Control Circular No.13/2018 (Circular 13/2018), setting out changes made to the Currency and Exchanges Manual for Authorised Dealers (Manual). 

As explained in our Tax & Exchange Control Alert of 21 April 2017, the Manual must be read in conjunction with the Exchange Control Regulations, 1961 (Regulations). It sets out the permissions and conditions applicable to transactions in foreign exchange that may be undertaken by Authorised Dealers (ADs) and/or on behalf of their clients in terms of Regulation 2(2) of the Regulations.

Amendments referred to in Circular 12/2018

In sA.1 of the Manual, the definition of the phrase “foreign currency” has been amended. Whereas the definition previously included “Rand to or from a non-resident Rand account”, this no longer forms part of the definition and instead a new definition for the phrase “Non-resident Rand” has been inserted. “Non-resident Rand” has been defined to mean Rand to or from a non-resident account that may be deemed, in certain circumstances permissible elsewhere in the Manual, as an acceptable payment mechanism in lieu of foreign currency. The definition further states that “Non-resident Rand” cannot, in any manner, be defined as foreign currency and is purely Rand held in a non-resident account or Rand received from a non-resident source.    

Section A.4 of the Manual, dealing with guidelines and procedures in respect of treasury outsourcing companies and foreign exchange brokers has been amended. In terms of sA.4(B) of the Manual, such entities must still obtain FinSurv’s written approval before it can commence with foreign exchange business, but pursuant to the amendment, applicant companies must now obtain and submit the treasury outsourcing company and foreign exchange broker application form that may be downloaded from the South African Reserve Bank’s (SARB) website. Prior to the amendment, the Manual simply stated that applications had to deal with certain aspects referred to in the Manual, for example, the operating business model to be followed by the applicant. 

The conditions for conducting the business of a treasury outsourcing company and foreign exchange broker, in sA.4(C)(i) of the Manual, have also been amended in three respects:

  • Whereas sA.4(C)(i)(a) previously required the treasury outsourcing company or foreign exchange broker, its officers and shareholders to be suitably qualified and be deemed as ‘fit and proper’, the requirement is now that it must at all times be in possession of a valid Financial Service Provider licence issued by the Financial Sector Conduct Authority (FSCA);
  • Section A.4(C)(i)(b) previously stated the treasury outsourcing company or foreign exchange broker may not buy or sell foreign currency for its own account and may not hold foreign currency or borrow or lend foreign currency. This requirement now appears in sA.4(C)(i)(c). Section A.4(C)(i)(b) now requires that a letter of compliance, on the official letterhead of the treasury outsourcing company or foreign exchange broker signed by two senior officials, must be submitted to FinSurv on an annual basis, for the period ending 31 December of each year. It must be sent by email to the address specified and the format of the letter of compliance can be downloaded from the SARB’s website; and 
  • In terms of sA.4(C)(i)(l) of the Manual, FinSurv had the right at any stage to carry out an inspection of the treasury outsourcing company’s or foreign exchange broker’s activities, record keeping, management controls and any other aspects deemed necessary. This requirement now appears in  sA.4(C)(i)(m) of the Manual and sA.4(C)(i)(l) now states that the requirements of the Financial Intelligence Centre Act No. 38 of 2001 must be complied with by the AD and the treasury outsourcing company or foreign exchange broker concerned. In addition, the treasury outsourcing company or foreign exchange broker must comply with the requirements of the Financial Advisory and Intermediary Services Act No. 37 of 2002.

Section B.2(K)(i) of the Manual, dealing with legacies and distributions from deceased estates and testamentary trusts has been amended to clarify the non-resident persons to whom legacies and distributions can be remitted. Previously, sections B.2(K)(i)(a) and B.2(K)(i)(b) stated that amounts could be remitted abroad to non-residents, including emigrants, provided the other requirements of these sections were met. These sections have now been amended to state that amounts can be remitted abroad to “non-resident private individuals, non-resident entities and/or trusts with no direct and/or indirect South African interest, including emigrants”, provided the other requirements in the sections are complied with.

Finally, references to the “Financial Services Board” in sB.2 of the Manual, have been replaced with the “Financial Sector Conduct Authority”. 

Amendments referred to in Circular 13/2018

Two amendments have been made to sB.2(H)(v) of the Manual, dealing with the reporting requirements for South African institutional investors. 

In terms of sB.2(H)(v)(a)(cc), all quarterly asset allocation reports had to be submitted within three months of the end of the calendar quarter to Finsurv either through an AD or via bulk or single direct reporting. Pursuant to the amendment, the period to submit such quarterly reports has been reduced to two months after the end of the calendar quarter. The manner of submission remains the same.

In terms of sB.2(H)(v)(a)(ee), managing institutions that manage assets on behalf of other institutional investors were required to report the asset allocation of such funds or policies to the originating institution as at the end of each calendar quarter within one month of each calendar quarter end. The section has been amended to state that the reporting of the aforementioned asset allocation must now take place within 15 days of each calendar quarter year-end. 

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