By Tenda Msinjili, Peter Kasanda, Michaela Marandu, Amalia Lui and Esther Kilimba, Clyde & Co LLP –
In this briefing, we outline the key changes in the Foreign Exchange (Bureau De Change) Regulations, which came into force on 7 June 2019 and revoked the 2015 Foreign Exchange (Bureau De Change) Regulations. All bureaux de change licensed by the Bank of Tanzania (BOT) to operate in Tanzania Mainland and Zanzibar will be required to comply with the Regulations.
Changes in the Foreign Exchange (Bureau De Change) Regulations, Government Notice No. 450 of 2019 (the Regulations) came into force on 7 June 2019. The Regulations have been made under section 5(a) and 7(1) of the Foreign Exchange Act, 1992 (the Act) and shall apply to Tanzania Mainland and Zanzibar.
Highlights of the Foreign Exchange (Bureau De Change) Regulations of 2019
- Application for a licence and the procedure thereof
- Processing of a licence, approval and rejection of an application
- Requirements for processing international money transfers
- Liability for non-compliance with the Regulations
- Other requirements
- Prohibited acts
Key changes in the Regulations
Application for a licence and the procedure thereof
Only companies limited by shares and incorporated under the Companies Act, No. 12 Cap 212 of 2002 (for Mainland Tanzania), and the Companies Act No. 15 of 2013 (for Zanzibar), can apply for a licence to operate a bureau. Applications shall be in writing and accompanied by:
- A duly completed Form A on application for bureau de change licence;
- A draft Memorandum and Articles of Association;
- Reference letters from two individuals who are not relatives of each of the shareholders and directors, vouching for their good morals and character;
- Proof of citizenship from the head of branch, proposed board of directors and shareholders;
- A duly completed Form B found in the Second Schedule to the Regulations. Form B is referred to as a fit and proper person form and is to be completed by shareholders, board members, the CEO and managers;
- Organisational structure comprising of an officer from the department of finance, operations and compliance;
- A feasibility study substantiating a demand gap in the proposed location; and
- Assurance that capital of not less than TZS 1 billion has been set aside for the business.
Processing of a licence, approval and rejection of an application
Within a month of receiving an application for a licence to operate a bureau, BOT may either issue a provisional approval or reject the application. If the application is rejected, the applicant will be issued with a notice of rejection setting out the reasons for the rejection.
An aggrieved party may, within 21 days, apply to BOT for review of its decision to reject the application. The aggrieved party will be notified of BOT’s final and conclusive decision which will be given within 30 days of having received the application for review.
At the expiry of 6 months after having been issued with a provisional approval, an applicant shall submit the following:
- Certified copies of the company’s Memorandum and Articles of Association;
- Evidence of registration of at least TZS 1 billion of the company’s paid up capital with the Registrar of Companies, accompanied by a bank statement confirming the paid up capital in TZS or foreign currency;
- A certified copy of a lease agreement or title deed of the proposed business premises;
- Evidence that all strategic locations of the business premises have been fitted with CCTV cameras;
- Proposed procedures and policies for detecting and reporting incidences of money laundering and financial terrorism; and
- Those in the business of money transfer shall, in addition to the above, provide evidence that a special account for depositing customers’ money has been opened; provide evidence of transfer of non-interest bearing deposit of US$100,000 to BOT; and submit a signed copy of an agreement between the bureau and mobile network operators, banks/financial institutions/international money transfer agents. The US$100,000 will be held by BOT as security for the business.
Liability for non-compliance with the Regulations
Engaging in bureau de change business without a valid license is an offence and punishable by suspension of the licence for not more than a period of a year, revocation of the licence and/or a fine not exceeding the equivalent of US$3,000.
A licence may be revoked for:
- obtaining foreign currency illegally;
- being found guilty and convicted of fraudulent dishonest offences or to have submitted false information during/after the processing of the application for a licence; and/or
- failure to comply with the provisions of the Act, the Regulations or any BOT directive.
A bureau de change guilty of misrepresenting its information or failing to submit the same to BOT will be liable to pay TZS 1 million for each day of default.
Requirements for processing international money transfers
Before a bureau de change can process international money transfers, it shall consider whether the transfer is for import purposes, for medical/educational expenses, for expatriates, for retirement benefits, for consultancy management or royalty agreements or for foreign shareholders’ dividends and profits. Depending on who is making the transfer and the purpose of the transfer, bureaux will require the following documents:
- A valid copy of the expatriate’s work permit or employment contract;
- relevant invoices;
- a letter or invoice from a learning/medical institution;
- contractual documents, invoices or fee note and certification of settlement of tax obligations;
- audited reports and documents confirming payment of all relevant taxes; and
- any other relevant document.
It should be noted that bureaux in Tanzania Mainland and Zanzibar shall not process any transfers that intend to invest the transferred funds outside East Africa.
Other requirements
- Bureaux whose licence has been revoked or business closed shall, within 14 days, surrender its licence to BOT.
- Every bureau shall end its name with the words ”bureau de change”, ”forex bureau” or ”foreign exchange bureau”.
- Bureaux are to display in a conspicuous place a notice that customers are entitled to be issued with a receipt for the purchase/sale of foreign currency or any other service.
- Bureaux shall keep copies of valid identification and other supporting documents for every foreign currency sale in excess of US$5,000.
- Bureaux engaged in money transfer are to maintain a foreign currency with a Tanzanian bank/financial institution.
- Bureaux must buy and sell foreign currency on the spot.
- Bureaux must hire a competent external auditor from the National Board of Accountants and Auditors and submit audited financial statements to BOT.
- Bureaux engaged in selling foreign currency shall keep customer records in strict confidence.
Prohibited acts
Bureaux are not allowed to:
- close business for more than 6 months;
- split transactions into smaller amounts to avoid compliance with reporting and documenting requirements;
- hold cash in excess of what is required to run the business for 3 concurrent days;
- refuse to sell foreign currency to a customer unless there is no currency to sell; and
- sell foreign currency to a non-resident unless there is proof that the non-resident obtained TZS from the sale of foreign currency/other lawful activities.
Additional points to note
BOT has the mandate to inspect a bureau with or without a notice and issue a summary of its findings including an action plan to correct any deficiencies.
For purposes of remittance, every bureau engaged in money transfer shall not, later than the next bank business day, deposit a customer’s money into a special money transfer account.
To operate a bureau, a company shall have a paid up capital of TZS 1 billion or more and at all times maintain a working capital equivalent of at least 70% of its paid up capital. Additionally, a bureau shall at all times maintain a minimum owners’ equity of TZS 1 billion or more. Should the capital and/or owners’ equity go below TZS 1 billion, the bureau will have 3 months to get it up to TZS 1 billion or more.
Approvals required by BOT:
- When changing ownership;
- when appointing a board member, CEO or head of branch;
- when relocating;
- before subletting or leasing;
- when changing its name or the name of its branch; and
- before injecting any additional capital into the business.