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The removal of South Africa from the Financial Action Task Force (FATF) graylist and the tightening of safeguards against money laundering reignited the already strong appetite among investors around the world to invest in the sophisticated and well-regulated market.
That's according to Timur Turlov, a Russian-born Kazakhstani entrepreneur, financier and CEO of Freedom Holding Corp., who told the Business Times this week that his Turlov Family Office Securities (TFOS) service has always considered South Africa an attractive market.
“I founded this company a little more than two years ago, and my dream was to better understand what the South African market is like. At Freedom Holding, we had a lot of experience working in Central Asia and Europe, and a little in the US, but I realized that South Africa has experienced regulators.
“It is one of the wealthiest markets in Africa in terms of capital, and there is keen interest in the financial markets; the developed stock market in the country; the developed culture of investment; implementing a modern trading platform; and building all the connectivity to the global markets to the American, European, Asian and African markets through our platform, certainly (makes the market attractive).”
TFOS opened an office in Stellenbosch two years ago. Private securities brokerages are regulated by the Financial Sector Conduct Authority (FSCA).
Turlow said South Africa remains “a good continental jurisdiction” and a great platform to attract investors. He said TFOS is interested in developing a retail approach to provide investment opportunities to its clients.
According to Forbes, Turlov has a net worth of around $6.8bn (R110bn). “We have received strong demand for our services (in South Africa), and our business is growing slightly more than expected.
“We don't just have South African clients; we also have some international clients who still trust this jurisdiction, who know that South Africa is a neutral jurisdiction, with a good reputation from global regulators and a good standing in terms of compliance and anti-money laundering initiatives.”
Turlov said cryptocurrencies have become an essential offering for modern brokers and should be available to clients as another financial instrument. “You can buy and sell cryptocurrencies just like you can buy and sell US dollars. They are another means for payments, money transfers and savings.
“I think the most widely used cryptocurrency is still a stablecoin. That's USDT and USDC. All those cryptocurrencies still meet the needs of the majority of customers. Of course, you can buy and sell all the other cryptocurrencies like Bitcoin and Ethereum. All the other classic cryptocurrencies, which are not stable.
“I'm not a big fan of crypto. I don't have much of a view on how this cryptocurrency can change the world. In my opinion, it's just an asset class like gold or other types of commodities. Because the value of this cryptocurrency will only depend on consumer confidence.”
Harry Scherzer, CEO of Future Forex, said that bad actors in the crypto industry should not be allowed to exploit consumers. South Africa's approach to cryptocurrency regulation will be important. While cryptocurrencies have significant potential, he believes overregulation could limit their usefulness, while underregulation would put consumers at greater risk of scams.
“I believe cryptocurrencies should be regulated. This is somewhat contradictory since they have gained popularity largely due to distrust of governments. However, we have also seen scams and cases where creators of newly launched coins made profits while speculation was high, leaving those coins with little or no value.
“In my view, as an asset class, crypto is still largely unproven. Where it has demonstrated real value is as a cross-border payments rail. The industry is working with regulators to include cryptocurrencies in exchange controls, and hopefully this will strike the right balance between protecting consumers and avoiding unnecessary friction. At the end of the day, blockchain has huge potential to make cross-border transactions faster, more efficient, and more cost-effective.”
Testament to the strong regulatory environment of the local financial market, the South African Reserve Bank on Thursday announced that it has imposed administrative sanctions on Southeast Exchange Company SA, an authorized dealer in foreign exchange with limited authorization (ADLA).
“It should be noted that the administrative sanctions were imposed due to certain weaknesses found in ADLA's control measures, which hindered its ability to conduct due diligence as outlined in its Risk Management and Compliance Program (RMCP) and follow the risk-based methodology outlined in its RMCP.”
ADLA also failed to appoint an anti-money laundering compliance officer and provide training to its staff, the statement said. Administrative sanctions imposed five financial penalties amounting to R600,000 for failure to comply with various provisions of the Financial Intelligence Center Act.
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