Foreign-backed remittance operators are rapidly expanding their digital first models across Africa, promoting faster and cheaper transfers as they seek to capture strategic corridors and consolidate market positions. But pay attention… beneath this wave of innovation lies an escalating concern amongst local policymakers and regulators alike.
We expect that local regulators will be adopting a much firmer stance when dealing with new remittance licenses by carefully considering (i) risks of systemic reliance on foreign-remittance platforms (ii) foreign ownership structures (UBOs) that place remittance controls outside of South Africa and (iii) impacts faced by local remittance operators vs robust foreign fintechs.
In legal context, Finsurv (the relevant regulatory body) has wide discretionary powers to consider national and economic interests in any new license applications. This means that information submitted by any prospective remittance operator under any heading (i.e. UBOs, governance structures or outsourcing arrangements) may be interpreted by FinSurv on a broader level (economic/ national scope) to either grant or reject new remittance licenses.
Substance Over Form: What the Regulator is looking for...
As a result, we recommend that all remittance applicants proactively and substantively deal with the following points in their written remittance representations to the regulators:
- Address foreign Ultimate Beneficial Ownership (UBO) structures;
- Ensure transparency and measured oversight in outsourced staffing and technology arrangements;
- Demonstrate meaningful deployment of local staffing resources and/or skills transfers;
- Empower locally based directors with genuine decision-making authority;
- Demonstrate how operational decisions are executed within South Africa;
- Show practical alignment with local compliance standards and financial inclusion objectives.
MDB Law’s Role
At #MDBLaw, we continue to guide foreign and local remittance operations during and after the ADLA licensing process to advise on local policy dictates, legal tenets and remittance compliance issues.