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The Tanzanian forex business under scrutiny

Approximate reading time: 3 minutes

All the bureau de change offices were barred from operating, and each office was guarded by at least two men clad in military uniforms.

 

The memories from Monday 19th November, 2018`s mid-morning will continue to linger in the minds of Arusha residents for a long time. All the bureau de change offices were barred from operating, and each office was guarded by at least two men clad in military uniforms.

This caused a lot of outcry from the residents as to why the military was used for such missions, to which the Central Bank governor, Professor Florens Luoga replied by stating it was due to absence of majority police who had been guarding centers of the ongoing Form Two examinations.

According to the governor this was a move by the Central Bank to crackdown on illegal foreign exchange bureaus and money laundering practices attributed to these bureaus in his speech with the press. Foreign exchange is a major business in Arusha because it is a major tourist hub in Tanzania attracting large numbers of foreigners and harbours a number of offices belonging to international organizations.

The search was conducted by special personnel from the Central Bank and the people were not allowed to either buy or sell until the search was complete. The governor stated that the central bank and the government were concerned by a recent upsurge in the illegal syndicates by foreign exchange bureaus, many of which did not have licences or were operating under illegal or borrowed licences.

He further stated that all applications to open forex shops would be suspended and new applications would not be accepted pending introduction of new rules and regulations. All those that will be found to have flouted the law will have their licences revoked.

The governor also mentioned of how the central bank had started her underground investigations six months earlier only to realize a number of cases of money laundering and backroom operations being rife in some foreign exchange bureaus. The central bank`s two previous attempts to crackdown the illegalities had been proven futile due presence of a large syndicate that prevented enforcement of the regulations. All this came after April this year when the government announced the closure of dozens of forex shops, a move which it explained was aimed at curbing money laundering and other related financial crimes. The Deputy Minister of Finance and Planning, Dr. Ashatu Kijaji, told the parliament at that time that the decision was meant to control dollarization in the country, saying the penalized shops were in one way or another contravening the law.

A special seats legislator, Devotha Minja, from the opposition CHADEMA, raised a concern on what she called an influx in foreign exchange bureaus in urban centers across the country, saying it caused the over-use of foreign currencies for local transactions. She argued that the trend promoted the use of the dollar, resulting in the devaluation of the local currency. She wondered why the government did not borrow a leaf from other countries that have clear rules about the use of local currency vis-à-vis foreign currency.

Source: The Exchange

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