Exchange control regulations are crucial for managing a country’s foreign exchange reserves and ensuring economic stability. In South Africa, violating these regulations can lead to severe legal and financial consequences for both individuals and corporations. Understanding these regulations, their implications, and enforcement mechanisms is essential for compliance and risk management.

Contravention of South African Exchange Control regulations

The Financial Surveillance Department of the South African Reserve Bank takes contraventions very seriously. Penalties for non-compliance ranges from 10% up to 40% of the contravened sum.

How are SARB (South African Reserve Bank) applications evaluated

When assessing applications, the Financial Surveillance Department considers:

• Circumstances surrounding the contravention
• Applicant’s involvement
• Severity of the contraventions

Instances requiring regularisation

• Foreign inheritance and legacies from bona fide non-resident estates: Inherited foreign assets from a non-resident on or before 17 March 1998.
• Gifts and/or donations from non-residents: Foreign asset received as a donation before 23 February 2022.
• Disposal of legal foreign assets held by private individuals: Disposed of assets to other individuals before 23 February 2022 without prior approval.
• Donations of legal foreign assets held by private individuals: Donated assets to other individuals before 23 February 2022.
• Loop structures created by private individuals / corporates: Existing loop structures created before 1 January 2021 or where the 40% shareholding threshold was exceeded without prior approval.
• Inward foreign loans: Received foreign loans and trade finance facilities from non-residents without prior approval.

Conclusion

Non-compliance with South Africa’s exchange control regulations poses significant legal and financial risks. To mitigate these risks and ensure adherence, seek professional advice to declare any exchange control contraventions.

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