Exchange Control Regulations are vital for managing a country’s foreign exchange reserves and ensuring economic stability. In South Africa, contraventions of these regulations can lead to severe legal and financial repercussions for individuals and businesses. Understanding the regulations, their implications, and enforcement mechanisms is essential for ensuring compliance and mitigating risks.

Exchange Control Regulations in South Africa

South Africa’s exchange control framework is overseen by the South African Reserve Bank (SARB) and is based on the Currency and Exchanges Act, 1933 (Act No. 9 of 1933) and the Exchange Control Regulations of 1961.

Contravention of the Exchange Control Regulations

The Financial Surveillance Department of the South African Reserve Bank (FinSurv) takes a strict stance on contraventions of the Exchange Control Regulations and any actions that circumvent the permissions and conditions stipulated in the Currency and Exchanges Manual for Authorised Dealers (Exchange Control Manual).

A contravention may involve either a matter that required reporting to Finsurv or one where prior exchange control approval was necessary.

South African residents who did not seek relief under the Special Voluntary Disclosure Programme (announced during the 2016 Budget Speech) and now wish to regularise contraventions must make a full disclosure to Finsurv. The penalty for regularisation ranges from 10% to 40% of the contravened amount, determined at Finsurv’s discretion. Such applications must include detailed and verifiable affidavits with comprehensive supporting documentation.

Applications cannot be submitted directly to Finsurv but must be routed through an Authorised Dealer, (a local commercial bank). When evaluating these applications, Finsurv considers several factors, including the nature and severity of the contravention, the applicant’s involvement, and the circumstances surrounding the case. Failure to voluntarily regularise contraventions may result in legal action, including the recovery of the full contravened amount where applicable.

Examples of Matters Requiring Regularisation

Non-Declaration to FinSurv

1. Foreign inheritance and legacies from bona fide non-resident estates
   South African resident individuals who inherited foreign assets from non-residents before 17 March 1998.
2. Gifts and/or donations from non-residents
   Foreign assets received by South African resident individuals as donations from non-residents before 23 February 2022.

Non-Approval from FinSurv

1. Disposal of legal foreign assets by individuals
   South African resident individuals who transferred authorised foreign assets to other residents before 23 February 2022.
2. Donations of legal foreign assets by private individuals
   South African resident individuals who donated authorised foreign assets to other residents before 23 February 2022.
3. Loop structures created by individuals or corporates
   Loop structures established by South African resident individuals and corporates before 1 January 2021, or cases where the 40% shareholding threshold was exceeded.
4. Inward foreign loans
   South African resident individuals or corporates who received inward foreign loans or trade finance facilities from non-residents.

Wrap It Up

Sorting out exchange control contraventions might not be fun, but it’s way better than dealing with the fallout of ignoring them. The good news, you don’t have to go through it alone. Reach out to a professional who knows the ropes and can guide you through the process.

Take Action Now!

Don’t wait for the penalties to pile up or for SARB to come knocking. If you think you’ve crossed any exchange control lines, take the first step today. Contact the Exchange Control Advisory Hub to assist you. Your future self will thank you!