Brief Note

June 2018

New rules for Ownership and Operation of Bureaux de Change in Tanzania

In this industry update, we provide an account of the Foreign Exchange (Bureau de Change)
(Amendment) Regulations of 2017 (the Bureau de Change Amendment Regulations) which
came into force on 2 June 2017. The Bureau de Change Amendment Regulations amend the
Foreign Exchange (Bureau de Change) Regulations of 2015 (the Bureau de Change
Regulations).

Background

Money laundering has been an on-going concern in Tanzania for many years. It has been
reported that banks, bureaux de change and other financial institutions have been used as the
intermediaries in this business.

Bureaux de change, being the fastest growing sector in the banking industry in Tanzania, have
been reported to be the businesses within the financial sector that spearhead the transfer and
exchange of illicit money within Tanzania.

The Bureau de Change Regulations imposed to regulate the bureaux de change were initially
enacted with minimal restrictions on ownership and operational requirements for those who
engage in the provision of foreign exchange.

Money launderers found it increasingly convenient to inject their money into the forex business
to be used for other investment purposes. According to the Bank of Tanzania (the BoT), this
makes it difficult to trace the origin of the money hence increases the chances of establishing
which money has been illegally laundered within the country.

In eradicating the aforementioned problems, the BoT has introduced tighter rules and has now
decided to monitor the operation of the forex businesses more closely.

Regulatory measures and reliefs

The BoT has introduced the Bureau de Change Amendment Regulations, which provide new
rules relating to the ownership and operation of the bureaux de change in Tanzania.

Key changes in the Bureau de Change Amendment Regulations include:

1. Increasing minimum capital for Class A Bureaux:

The Bureau de Change Amendment Regulations have amended regulation 16 (1) of
the Bureau de Change Regulations by increasing the minimum owner's equity from not
less than TZS 100,000,000 (Tanzania shillings one hundred million) to not less than
TZS 300,000,000 (Tanzania shillings three hundred million) for those who want to
operate as a Class A bureau de change.

2. Increasing minimum capital for Class B Bureaux:

The Bureau de Change Amendment Regulations have amended regulation 16 (2) of
the Bureau de Change Regulations by increasing the minimum capital from not less

.
 than TZS 250,000,000 (Tanzania shillings two hundred and fifty million) to TZS
1,000,000,000 (Tanzania shillings one billion) for those who want to operate as a Class
B bureau de change.

3. Reduction of grace period from 24 months to 3 months for compliance:

The Bureau de Change Amendment Regulations have amended the Bureau de
Change Regulations by reducing the grace period given to owners and those operating
bureaux de change to increase the minimum capital. The period has been reduced
from 24 months to 3 months.

4. Increase of security deposit amount for Class B permit holders:

The Bureau de Change Amendment Regulations amend regulation 24 (1) of the
Bureau de Change Regulations which required Class B permit holders to deposit USD
50,000 (United States Dollars fifty thousand) to the BoT as security deposit. Under the
Bureau de Change Amendment Regulations Class B permit holders now have to
deposit USD 100,000 (United States Dollars one hundred thousand) to the BoT as
security deposit within 3 months.

Recommended strategies

Some strategies provided in the Bureau de Change Regulations that may assist in the fight
against money laundering include the following:

1. Compliance with the Bureau de Change Regulations with regard to requirements for
directors and shareholders, which state that:
1.1 No person shall become a director, shareholder or member of management or staff
in more than one bureau; and
1.2 Shareholders, directors and head of branches are required under Regulation 6 of
the Bureau de Change Regulations to fill Form B found in the Schedule to the
Bureau de Change Regulations, which is the "Fit and Proper Person Form" and
authenticate the source of funds invested in their bureau de change.

2. Compliance with and monitoring of the requirement to maintain adequate accounting

and internal control systems;

3. Compliance with the requirement for bureaux to provide to the BoT their source of
funds; and

4. Effectively utilising internal procedures relating to identification and reporting of

suspicious transactions.

The enforcement of the Bureau de Change Amendment Regulations has resulted in the
revocation of 144 bureaux de change and may be perceived to immensely restrict the entry of
future Class B bureaux de change into the market. However it can be argued that the Bureau
de Change Amendment Regulations have and will continue to increase customer confidence
and limit the potential occurrences of money laundering.

The Bureau de Change Regulations will aid in the reduction of reported incidents of theft and
robbery as they provide for the mandatory requirements of every bureau de change to install
CCTV cameras in all strategic areas in the bureau de change. Presently this is being more
strictly enforced.

Currently the BoT is working to relicense bureaux which are in compliance with the Bureau de
Change Amendment Regulations. It is reported that a total of 109 bureaux de change and 53
branches are licensed to operate in Tanzania. Once the relicensing process is complete, the
BoT will begin processing new applications for bureaux de change. It is envisioned that the
increased scrutiny on bureaux de change will reduce the instances of money laundering.

We hope this information has been useful. Should you require further information, please do
not hesitate to contact us.

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from acting as a result of material contained in this summary. Further advice should be taken
before relying on the contents of this summary. Clyde & Co Tanzania accepts no responsibility
for loss occasioned to any person acting or refraining from acting as a result of material
contained in this summary. No part of this summary may be used, reproduced, stored in a
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Clyde & Co Tanzania 2015 registered in England and Wales. Authorised and regulated by the
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Contact us

Tenda Msinjili
Senior Associate
Direct Dial: + 255 76 898 3016
Tenda.Msinjili@clydeco.com

Michaela Marandu
Senior Associate
Direct Dial +255 76 898 3024
Michaela.Marandu@clydeco.com

Amreen Ayub
Associate
Direct Dial +255 76 898 3032
Amreen.Ayub@clydeco.com

Clyde & Co Tanzania

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Dar es Salaam, Tanzania