CBL allays fears over cross border EFT payments



MASERU – To address concerns regarding money laundering and terrorism financing, regulators within the Common Monetary Area (CMA) have taken decisive action. Starting in September 2024, they will transition low-value cross-payments to a regional infrastructure payment system. The CMA is a monetary union which encompasses Lesotho, South Africa, Namibia, and Eswatini.

Previously, low-value money transfers below M5 million were handled through South Africa’s domestic retail payment system. Transactions exceeding M5 million were classified as high-value and necessitated the completion of personal information at the bank.

However, treating low cross-border payments as domestic transactions was found to be non-compliant with international Anti-Money Laundering and Combating of Financing of Terrorism (AML/CFT) standards. Consequently, CMA regulators have chosen to migrate these payments to a regional infrastructure payment system. This system focuses on developing and implementing payment systems and networks at a regional level, aiming to facilitate efficient fund transfers, enable cross-border transactions, and enhance financial connectivity within the region.

During a press conference held in Maseru, Mothetsi Sekoati, the Director of Payments and Settlements at the Central Bank of Lesotho (CBL), said Lesotho, Namibia, and Eswatini all utilise the South African Rand as their official currency. As a result, the current treatment of low-value payment systems, covering transactions below M5 million, considers them to originate from South Africa, regardless of their actual source within the three countries.

Sekoati explained that transactions are simply conducted through mobile apps, bank apps, and internet banking platforms. He stressed the importance of providing clarity regarding the decision made by the regulators of the CMA concerning electronic funds transfer (EFT) payments and collections, particularly in response to reports from certain media outlets.

He pointed out the lack of transparency in the existing system, highlighting South Africa’s inability to trace the origin and sender of funds. Consequently, Sekoati said the CMA standards are formulated to prevent criminals from exploiting financial systems, ensuring that funds are neither misused nor moved illicitly.

He underscored the necessity of regulating low cross-border payments within the CMA, considering that trade extends beyond the four member countries to other nations within the Southern African Development Community (SADC) and globally. This emphasises the importance of conducting trade with legitimate and credible partners.

“To comply with regulations, low-value cross border payments will be routed through regional infrastructure designed for processing cross-border payments, starting September 2024,” Sekoati said. He further clarified that some media reports have misinterpreted this information, incorrectly claiming that EFT payments will no longer be permitted within the CMA.

“This is inaccurate and misleading. Basotho will still have the ability to send EFT payments, but through proper channels,” he clarified. Additionally, he debunked misleading information suggesting that South African accounts will be unable to receive EFT payments from Lesotho, Eswatini, and Namibia.

“This claim is also unfounded, as the regional infrastructure already handles various payments within the CMA and extends beyond. The introduction of the new system is geared towards combating money laundering and terrorist financing. “Despite these enhancements, funds can still be transferred instantly, and the pricing or charges will remain unchanged.”

Leave a Reply

Your email address will not be published. Required fields are marked *