In a warning to South Africa’s growing community of crypto users and businesses, the Financial Intelligence Centre (FIC) has classified the country’s crypto asset service provider (CASP) sector as carrying a “high” inherent risk for money-laundering (ML) and terrorist financing (TF).
The classification was revealed in a sector risk assessment report recently released by the FIC, which examines how vulnerable local CASPs are to being exploited for illicit financial activities.
The report focuses on a range of risk factors, including the types of services offered, transaction methods, client profiles and geographic considerations.
With more than 5.8 million South Africans – nearly 10% of the population – now owning crypto assets, digital currencies have surged into the mainstream.
While crypto offers benefits such as speed, decentralisation and global access, these qualities also make it an attractive tool for criminal syndicates and terrorist networks, the report warns.
The FIC is mandated to assist in identifying the proceeds of crime, and in combating ML, TF and the financing of proliferation of weapons of mass destruction, thereby helping to make SA’s financial system intolerant to abuse.
In compiling the report, the FIC conducted two rounds of public consultations, consultation with the Financial Sector Conduct Authority (FSCA), comparative studies, a desktop monitoring assessment and relied on data from regulatory reports filed by CASPs registered with the FIC.
Escaping the net
According to the report, as of 10 February 2025, a total of 256 CASPs had registered with the FIC under updated legislation enacted in December 2022.
However, the FIC cautions that the actual number of active players may be significantly higher, as some institutions may be operating under the radar, without registering as required.
“Based on available statistics, it is estimated that more than 5.8 million people (9.44% of South Africa’s total population) currently own crypto assets. Calculating the total value of these crypto assets is challenging, and due to the rapid changes in ownership, such information may not be accurate,” it adds.
According to the FIC, some of the identified CASPs have head offices in other jurisdictions, while they also operate in South Africa.
It notes that some local business entities also operate internationally, which could possibly increase geographic ML and TF risks due to the differences in supervision.
The FIC’s statistics show that 25 South African business entities have their head offices in other jurisdictions, while also conducting business in SA.
Of these jurisdictions, Singapore, Switzerland and the UK are each home to three head offices of institutions also operating in SA.
While regulatory clarity is improving, the report notes that the crypto industry still faces challenges related to regulatory uncertainty.
“Changes in regulations could have a significant impact on CASPs, and they need to stay agile and adapt to new rules. While the money-laundering and terrorist financing risks have technically been addressed by legislative changes, such legislative changes in respect of exchange control are still in the planning phase,” says the report.
“The lack of proper exchange control measures for crypto assets may also negatively impact on the money-laundering and terrorist financing risks associated with crypto assets.”
It adds that many South Africans are not fully acquainted with crypto assets, or the services offered by CASPs.
“Consumers need to be made aware of the use, storage and transfer value of crypto assets, and any concerns need to be addressed. Consumers also need to be informed about how they can fall victim to organised crime using them as money mules.”
Adds the FIC: “Due to the potential for abuse, the challenges and red flag indicators, the fact that the sector is still relatively new in the regulatory framework and that mitigating supervisory measures are still being refined, the overall inherent risks of money-laundering for CASPs in South Africa, based on national and international experience, can be classified as ‘high’.
“Due to the potential impact of terrorist activities, international experience and investigations of terror financing in South Africa, where crypto assets were used, the inherent TF risk for the sector can also be classified as ‘high’.”
Visible activity
The report notes that cyber criminals use crypto assets to add anonymity to their transactions. However, it points out that while crypto assets may provide some advantages over traditional methods of money-laundering, the technology is also publicly recorded and accessible, making every transaction traceable.
This includes crypto wallets which are publicly available, that were previously used in the commission of crimes, it adds.
“Similarly, there are crypto asset addresses that have been blacklisted by certain regulatory authorities abroad, which are publicly available as well.”
Regulatory measures in SA, as applicable to CASPs, are intended to manage and mitigate emergent ML and TF risks facing the sector, says the FIC.
These measures include that CASPs are licensed by the FSCA and registered with the FIC, subject to effective monitoring and supervision, and are compliant in terms of the FIC Act and standards set by the Financial Action Task Force.
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