Key Takeaways
- The South African Reserve Bank (SARB) alleges that fintech firm Kastelo moved roughly R4 billion offshore by exploiting the foreign‑exchange allowances of individual South Africans.
- Kastelo, linked to Democratic Alliance (DA) MP Mark Burke, is accused of using clients’ Single Discretionary Allowance (SDA) and Foreign Investment Allowance (FIA) without their full knowledge or consent.
- The Reserve Bank presented evidence of client bonuses, unusually large loans relative to income, and the opening of foreign bank accounts in clients’ names.
- Kastelo denies wrongdoing, claiming its automated crypto‑trading model kept funds within South Africa’s exchange‑control framework and that clients granted discretionary mandates.
- The DA initially defended Burke but later removed him from finance‑related parliamentary committees while the investigation proceeds.
- The ANC and EFF have condemned the alleged scheme, calling for criminal charges and a thorough investigation, arguing that the conduct amounts to financial crime.
- Burke states he resigned from Kastelo in 2024 and ceased chairmanship of the Kastelo Group in February 2026, distancing himself from the ongoing controversy.
- The case highlights tensions between fintech innovation, regulatory compliance, and political accountability in South Africa’s exchange‑control regime.
Overview of the Allegations
South Africa’s financial watchdog, the South African Reserve Bank (SARB), has launched an investigation into Kastelo, a fintech company associated with Democratic Alliance (DA) Member of Parliament Mark Burke. SARB alleges that Kastelo facilitated the offshore transfer of approximately R4 billion by exploiting the foreign‑exchange allowances granted to individual South Africans under exchange‑control regulations. The controversy has attracted intense political scrutiny, prompting the DA to distance itself from Burke while opposition parties demand accountability and potential criminal proceedings.
Exchange‑Control Allowances Explained
Under South Africa’s exchange‑control framework, residents may move money abroad using two primary allowances: the Single Discretionary Allowance (SDA) of up to R1 million per year and the Foreign Investment Allowance (FIA) of up to R10 million per year. These allowances are intended for legitimate personal or investment purposes and require the account holder’s explicit consent. SARB’s investigation suggests that Kastelo accessed the combined allowances of its 891 clients—yielding roughly R891 million in SDA and R8.9 billion in FIA annually—to acquire foreign currency and transfer it out of the country.
Mechanics of the Alleged Offshore Transfer
According to SARB’s court papers, Kastelo’s business model relied on using clients’ SDA and FIA quotas to purchase foreign currency, which was then moved offshore. The bank asserts that the dominant purpose of this model was to circumvent exchange‑control regulations by steering funds for Kastelo’s own benefit rather than for the clients’ declared investments. By November 21, 2025, SARB had identified transactions totalling about R4 billion that it suspects violated exchange‑control rules, raising concerns that the allowances were not being used for the clients’ own financial activities.
Evidence of Improper Client Incentives and Misunderstanding
SARB’s filings detail several red flags: some clients were offered bonuses of up to R2,000 for using their SDA and up to R10,000 for employing their FIA. Moreover, certain clients earning around R15,000 per month reportedly received loans of approximately R249,000 to fund the transactions—disproportionate to their income levels. The Reserve Bank also noted that many clients appeared unaware that foreign bank accounts were being opened in their names or that their allowances were being utilised for offshore transfers, indicating a lack of informed consent.
Kastelo’s Defence and Business Model
Kastelo has rejected SARB’s allegations, maintaining that its operations were lawful. The company contends that clients granted it discretionary investment mandates to manage their funds. Kastelo claims it employed an automated trading strategy that sought price differentials in the cryptocurrency market, converting rand‑denominated assets into foreign currency, sending the money offshore for trading, and then repurchasing rands at the end of each trading cycle. According to Kastelo, the funds were never permanently exported; they remained within South Africa’s exchange‑control system because they were returned after each trade.
Legal Challenge and Court Outcome
Kastelo sought to overturn SARB’s decision to block its funds by approaching the court. The company argued that the Reserve Bank’s blocking order was unlawful and that its activities complied with exchange‑control rules. The court dismissed Kastelo’s application, upholding the SARB blocking order and allowing the restriction on the firm’s assets to remain in place while the investigation continues.
Political Fallout Within the DA
The allegations initially placed the Democratic Alliance in a delicate position. Party leaders initially stood by Mark Burke, but as the SARB investigation intensified, the DA opted to remove him from Parliament’s finance‑related committees pending the outcome of the probe. This move was intended to preserve the party’s reputation for accountability, although critics argue it came only after mounting public pressure.
ANC’s Response and Calls for Criminal Action
The African National Congress (ANC) condemned the DA’s handling of the matter, asserting that removing Burke from committees does not shield him from accountability. The ANC announced its intention to lay criminal charges against both Burke and Kastelo, arguing that the DA applies a double standard when addressing alleged misconduct within its own ranks. The party emphasised that no public office holder is above the law and urged a rigorous investigation into the alleged financial misconduct.
EFF’s Commentary on the Scheme
The Economic Freedom Fighters (EFF) also entered the fray, labelling the alleged conduct as more than a mere regulatory breach. The EFF described the scheme as embodying the hallmarks of financial crime: the unauthorised use of other people’s money and identities, the deliberate concealment of offshore accounts from the very clients whose allowances funded them, and the deception of the central bank regarding the true nature of Kastelo’s business. The party called for the investigation to be pursued to its conclusion and for appropriate legal sanctions to follow.
Burke’s Personal Statement and Timeline
Mark Burke sought to distance himself from Kastelo, stating that he resigned from the company in 2024 to pursue a political career and ceased serving as chairperson of the broader Kastelo Group in February 2026. He maintains that his involvement ended well before the SARB’s investigation identified the alleged R4 billion in offshore transactions. Burke’s resignation timeline is intended to demonstrate that any wrongdoing occurred after his departure, though investigators may still examine his prior role and potential ongoing influence.
Broader Implications for Regulation and Fintech
The Kastelo case underscores the challenges regulators face when overseeing rapidly evolving fintech models that intersect with strict exchange‑control regimes. It highlights the need for clearer guidelines on how discretionary investment mandates may be used, stronger oversight of client‑bonus structures, and enhanced mechanisms to verify that foreign‑exchange allowances are employed for the genuine benefit of the account holders. Policymakers may consider tightening reporting requirements, imposing stricter due‑diligence obligations on fintech firms, and increasing penalties for schemes that obscure the true end‑use of transferred funds.
Conclusion and Outlook
As the SARB investigation proceeds, the outcome will likely have significant ramifications for both the individuals involved and the broader financial‑services sector in South Africa. A finding of wrongdoing could lead to substantial fines, restitution orders, and criminal prosecutions, potentially reshaping how fintech companies structure cross‑border services. Politically, the episode may influence public trust in the DA and spur broader debates about accountability, transparency, and the balance between innovation and regulation in the nation’s exchange‑control framework. Stakeholders across industry, government, and civil society will be watching closely to see how the matter is resolved and what reforms emerge in its wake.