As per the latest guidance note issued by the South African banking sector regulator, Prudential Authority, Risk Assessment does not imply that financial institutions should avoid or eliminate risks through wholesale termination of customer relationships with entities such as crypto asset service providers. Instead, the regulator wants financial institutions to consider “de-risking” only when “the risk is too good to be managed successfully.”
threat to financial integrity
South Africa’s main banking industry regulator, Prudential Authority, has said that some banks’ decisions to terminate ties with crypto entities “may pose a threat to financial integrity in general.” Furthermore, the regulator suggested that avoiding cryptocurrency entities altogether could potentially undermine the risk management processes of banks.
According to a guidance note sent to financial institutions by Prudential Authority CEO Fundi Shazibana, the removal of crypto entities such as exchanges from the banking system “may create ambiguity in the financial conduct of affected individuals or entities.” It also eliminates the possibility of treating risks such as money laundering, terrorist financing and proliferation financing, said the eight-page guidance note.
Shazibana’s comments come more than six months after reports emerged that some South African financial institutions had sent account termination notices to customers that offered automated cryptocurrency arbitrage services. As previously reported by Bitcoin.com News in late 2021, Standard Bank, one of the banks, insisted at the time that the cessation of services to crypto entities was to ensure compliance with the financial institution’s regulations.
However, in the guidance note, which should also be sent to independent auditors of the institutions concerned, the CEO instead urges banks to conduct relevant risk assessments for each crypto asset (CA) or crypto asset service provider (CASP). Shazibana explains:
Thus, it is prudent for banks to be able to classify customers belonging to CA/CASP at risk by conducting a risk assessment, which will help banks determine the appropriate level. [money laundering, terrorist financing, proliferation financing] Consistent with the application of a risk-based approach, as opposed to total avoidance, risk management measures are essential.
The CEO argued that the decision to release or terminate the service should be made only after “the risk posed by a particular business or customer is too good to be successfully managed”.
‘A big step for cryptocurrency’
Responding to the latest guidance note from the Prudential Authority, Farzam Ehsan, CEO of a South African crypto exchange platform called Waller, said in a tweet that the arguments made by the regulator indicate that it now understands the benefits of monitoring crypto transactions. Is. Ehsan also gave his thoughts on what the guidance note means for the cryptocurrency industry. He Told,
“In my view, this is a great step forward for crypto, for South Africa, and for the banks themselves. It is particularly helpful for companies in the crypto space that need to responsibly build products to serve people.” The risks and bad actors clearly reside in crypto (as they do elsewhere) and banks will not immediately start banking all crypto companies.”
Waller Boss also argued that the latest guidance note would steer South Africa in the “right direction of allowing new technologies and innovations to flourish in the country.”
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