Tanzania opens doors for new players into forex business

US dollars and Kenyan currency on display at a forex bureau. Tanzania has over the past seven months closed down over 100 private forex bureaux across the country during a crackdown on illegal activity, including money laundering. PHOTO FILE | NMG 

In Summary

• The new regulations include a new minimum capital requirement of Tsh1 billion ($433,000) for all forex businesses.
• This is more than three times the previous minimum Tsh300 million ($130,000).
• Existing bureaux have been given up to three months to increase their minimum capital

By BEATRICE MATERU
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The Bank of Tanzania has invited individual entities and licensed banks to venture into foreign currency dealership after announcing tough new regulations to govern the sector.

BoT’s manager for microfinance and bureau de change operations, Victor Tarimu said that all requirements for opening and running a foreign exchange mart in Tanzania are now detailed in the Foreign Exchange (Bureau de Change) Regulations of 2019, hence “people are welcome to open forex shops in their private capacities after fulfilling the criteria from the central bank.”

The Bank has over the past seven months closed down over 100 private forex bureaux across the country during a crackdown on illegal activity, including money laundering.

A spot check by The EastAfrican last week found almost all the forex shops in the commercial capital Dar es Salaam remained shut as uncertainty continued to surround Tanzania’s forex trade.

Only three licensed bureaux are understood to be operating countrywide, but commercial banks have been sanctioned to provide the service.

Mr Tarimu said many of the bureaux could soon be allowed to resume operations.

Illegal activity

The BoT-led operation conducted in Dar es Salaam and Arusha between November 2018 and February this year aimed to curb theft, money laundering and counterfeit money fraud linked to forex operations.

The new regulations, which were made public last week, include a new minimum capital requirement of Tsh1 billion ($433,000) for all forex businesses.

This is more than three times the previous minimum Tsh300 million ($130,000). Existing bureaux have been given up to three months to increase their minimum capital.

The rules also require that bureaux to conduct money transfers only through locally licensed banks, financial institutions, mobile network operators and international transfer agents “subject to conditions prescribed in the regulations.”

“This is due to various risks associated with such services, including theft and chances of being issued with counterfeit currencies,” BoT said, adding that further engagement in unauthorised bureaux de change activities would be construed as a criminal offence that “may lead to monetary fines or imprisonment.”

The central bank has not placed any guiding rates for foreign currencies, but removed the $10,000 limitation on the amount that can be sold to a resident of Tanzania travelling abroad.