South African foreign exchange dealers — including authorised dealers, bureaux de change, and money changers — are accountable institutions under FICA and are also subject to the SARB's exchange control regulations. The forex sector is considered high risk for money laundering because foreign exchange transactions can be used to move funds across borders and to convert illicit funds into foreign currency. This guide explains the specific KYC requirements that apply to forex dealers.
Who Is a Forex Dealer?
Schedule 1 of FICA includes persons who carry on the business of dealing in foreign exchange. This covers authorised dealers (typically banks), authorised dealers with limited authority (such as bureaux de change), and money changers. All are accountable institutions subject to full FICA obligations.
Forex dealers must also be authorised by the SARB under the Currency and Exchanges Act. The SARB's exchange control framework imposes additional requirements on forex transactions, including reporting requirements for large transactions and restrictions on certain types of cross-border payments.
CDD for Forex Customers
Forex dealers must verify the identity of every customer before conducting a foreign exchange transaction. For individual customers, this means verifying name, date of birth, identity number (or passport number for foreign nationals), and address. For business customers, this means verifying the entity and all beneficial owners.
For walk-in customers at a bureau de change, the level of verification required depends on the size of the transaction. The risk-based approach allows for simplified due diligence for small, low-risk transactions, but higher-value transactions require full CDD.
Cash Transaction Reporting
Forex dealers must report cash transactions above R49 999 to the FIC under FICA Section 28. In the forex context, this includes cash purchases and sales of foreign currency above the threshold. The report must be submitted within the prescribed timeframe.
Suspicious Transaction Reporting
Forex dealers must file Suspicious Transaction Reports (STRs) with the FIC when they suspect a transaction involves the proceeds of crime or terrorist financing. Common red flags in the forex sector include: structuring transactions to avoid reporting thresholds, using multiple currencies in a single transaction, and customers who are unable to explain the source of their funds.
Frequently Asked Questions
- Does a bureau de change need to verify the identity of every customer?
- Yes, for transactions above the simplified due diligence threshold. The bureau's RMCP must specify the threshold and the verification requirements for each tier of transaction.
- What documents does a forex dealer need for KYC?
- For South African citizens: a Smart ID card or green ID book. For foreign nationals: a valid passport. For larger transactions, proof of address and source of funds may also be required.
- Must a forex dealer report all large transactions to the SARB?
- Forex dealers must comply with the SARB's exchange control reporting requirements, which are separate from FICA's cash transaction reporting requirements. Both sets of requirements apply.
- What is structuring and why is it a red flag for forex dealers?
- Structuring involves breaking up a large transaction into multiple smaller transactions to avoid reporting thresholds. Structuring is itself a criminal offence under FICA and is a common red flag for money laundering in the forex sector.
- What is the penalty for a forex dealer that does not conduct KYC?
- The FIC can impose administrative sanctions of up to R10 million per contravention. The SARB can also revoke the dealer's exchange control authorisation.
Ready to Prepare Your KYC Package?
Use the sector-specific FICA compliance checklist for Forex Dealers to ensure every required document and control is in place before your next FIC inspection or client onboarding.
Download the Forex Dealers FICA Checklist →