ADLA license requirements as set out by the Financial Surveillance Department of the South African Reserve Bank

The Republic of South Africa (South Africa) has had exchange controls since 1939 and

the foundation thereof is the Currency and Exchanges Act, 1933 (Act No. 9 of 1933)

(the Act). The Exchange Control Regulations (Regulations) are promulgated thereunder

in terms of section 9(1) of the Act, on 1961-12-01. In terms of these Regulations, the

control over South Africa’s foreign currency reserves, including accruals thereto and

spending thereof is vested in the Treasury, who is authorised to grant permissions or

exemptions for certain transactions, subject to certain conditions.

As a designated supervisory body, the Financial Surveillance Department is in terms of

section 45 of the Financial Intelligence Centre Act, 2001 (Act No. 38 of 2001) (the FIC

Act) responsible for supervising and enforcing compliance with the FIC Act or any order,

determination or directive made in terms of the FIC Act by all Authorised Dealers in

foreign exchange with limited authority (ADLAs) regulated or supervised by it.

In terms of Regulation 2(2), an Authorised Dealer and Authorised Dealers with Limited

Authority shall not buy, borrow, receive, sell, lend or deliver any foreign currency or gold

except for such purposes or on such conditions as the Treasury, as defined, may

determine, subject to the delegation referred to above.

The Financial Surveillance Department of the South African Reserve Bank issued a

manual, circulars and directives applicable to transactions in foreign exchange that may

be undertaken by Authorised Dealers in foreign exchange with limited authority (ADLAs)

and/or on behalf of their customers in terms of Regulation 2(2), details of related

administrative responsibilities, the FinSurv Reporting requirements as well as the

requirements of the FIC Act applicable to ADLAs.

The South African Reserve Bank views contraventions of the Exchange Control

Regulations, as well as any actions to circumvent the permissions and conditions

contained in these directives and manual, in a very serious light.

Regulation 22 provides that any person who makes an incorrect statement in a

declaration made, or return rendered for the purposes of these Regulations or refuses

or neglects to furnish any information which he/she is required to furnish under these

Regulations, shall be guilty of an offence and liable upon conviction to the fine or to

imprisonment or to both such fine and imprisonment. This may also result in the

authorisation granted being withdrawn.

In instances where an Authorised Dealer with limited authority cannot buy or sell foreign

currency in terms of the permissions and conditions set out in the ADLA Manual, an official application with full details applicable to the request must be submitted to the

Financial Surveillance Department.

In carrying out the important duties entrusted to them, ADLAs should appreciate that

uniformity of policy is essential, and that to ensure this it is necessary that the

requirements contained in the Regulations, ADLA Manual, circulars, the FIC Act and

Regulations under the FIC Act be applied strictly and impartially by all concerned.

The ADLA will only be permitted to commence with the approved business once the

beneficial owner(s), shareholder(s), director(s), senior exchange control officer and the

anti-money laundering compliance officer are deemed as ‘fit and proper’ by the

Financial Surveillance Department of the South African Reserve Bank.

Furthermore, the finalisation of the Risk Management and Compliance Programme for

compliance in accordance with the provisions of section 42 of the FIC Act must also be

provided.

The Reporting system must also be successfully tested and certified.

ADLAs are required to report all cross-border foreign exchange transaction irrespective

of the amounts and currencies involved. The development of these reporting rules must

be aligned to the operational and technical specifications of the Regulator and must

originate at same source from the accounting system with no manual interventions.

Based on the reconciliation module required by the Regulator, ADLAs must make use of

a straight-through processing system, in electronic format, which must daily account for

all reportable and non-reportable transactions, including interbank transactions,

reconciling all such transactions at the ADLA and reconciling the transactions submitted

to and confirmed by the South African Reserve Bank.

An inspection manual must also be created which should include a comprehensive flow

diagram clearly depicting the flow of transactions through various systems from

capturing to submission of these transactions to the Financial Surveillance Department.

Suitable back-up procedures must be provided, pre- and post-certification managerial

letter of comfort and annual managerial letter of comfort.

At Hertz Consulting, our team of experts will guide you in terms of these ADLA license requirements and application process and ensure your company is equipped to comply with

the regulatory requirements of the various regulators, and ensure you have seamless

experience in this application process.