INTRODUCTION
On 06th October 2023, the Bank of Tanzania (BoT) issued new Foreign Exchange (Bureau de Change) Regulations via Government Notice No. 730 of 2023. The 2023 Regulations replaces the older Foreign Exchange (Bureau de Change) Regulations, 2019. The Regulations cover various aspects related to bureau de change businesses, management, operation as well as supervision in both mainland Tanzania and Zanzibar.
This update therefore, highlights the changes brought about by the regulations and its impact to the business and community at large.
LICENSING REQUIREMENT
Engaging in a Bureau de Change business without a valid license issued by the Bank of Tanzania (the Central Bank) remains prohibited (Regulation 4). Violating this requirement constitutes a criminal offence which attracts a penalty of TZS 4 million, or imprisonment for a term of up to 14 years, or a combination of both.
CLASSIFICATION OF BUREAU DE CHANGE LICENSES
The 2023 Regulations introduces 3 classes of bureau de change licenses:
Class A – this license allows the licensee to deal in spot transactions, money transfer and other financial services related activities. It can be granted to either local or foreign owned entities. The minimum capital required is TZS 1 billion for majority foreign owned entities and TZS 500 million for majority local owned entities.
Class B – this license allows the licensee to deal with spot transactions only and requires 100% local shareholding. Minimum capital required is TZS 200 million.
Class C – this license can only be granted to hotels with 3 stars ranking or above and allows the licensee to deal with spot transactions only with customers of the hotel.
DEFINITION OF SPOT TRANSACTION AND PROHIBITION OF DEALINGS OTHER THAN SPOT TRANSACTIONS
Under the Regulations “spot transaction” is defined as a sale or purchase of foreign currency of which settlement is made within the same day using cash, bank, financial institution, mobile money operator or any other means approved by the BoT. The Buying or selling of foreign currency by a Bureau de Change shall be on a spot basis.
Furthermore, Buying or selling of foreign currency by a Bureau de Change shall be on spot basis. This means, a Bureau de Change is not allowed to deposit or accept Tanzanian Shillings or foreign currency with intent to obtain or supply the Tanzanian Shillings or foreign currency equivalent, either wholly or in part at a future date (Regulation 28).
ELIGIBILITY FOR APPLICATION OF BUREAU DE CHANGE LICENSE
Eligibility for application of a Bureau de Change license is extended to a company limited by shares, or a hotel incorporated under the laws of Tanzania Mainland or Zanzibar. A person intending to operate a Bureau de Change must include in the name of the business the words “Bureau de Change”, “Forex Bureau” or “Foreign Exchange
Bureau”.
PROCEDURES FOR APPLICATION
Application for a license has to be submitted in writing to the Bank of Tanzania accompanied by, among others, prescribed forms together with a board resolution authorizing the application, and evidence from the Registrar of Companies of paid-up share capital, among others.
PROVISIONAL APPROVAL
Upon receiving a complete application for license, the Bank of Tanzania has a period of 1 month to either grant provisional approval or reject the application. If the application is rejected, the Bank of Tanzania will promptly notify the applicant in writing, providing clear and comprehensive reasons for the decision. However, it is essential to note that the provisional approval does not grant the right to conduct Bureau de Change business.
REVIEW OF BOT DECISION REJECTING APPLICATION CONDITIONS SUBSEQUENT TO PROVISIONAL APPROVAL
In the event the application is rejected by Bank of Tanzania, an applicant who is aggrieved by the that decision may apply to the Bank of Tanzania for review of its decision within 21 days from the date of the notification. The Bank of Tanzania is required to review the decision within thirty days of receipt of the application and notify the applicant in writing of its final decision.
Applicants for Class A and Class B Bureau de Change licenses must fulfil and submit specific requirements within 6 months of receiving provisional approval from the Bank of Tanzania. These requirements include among others:
- A bank statement confirming the allocated paid-up capital.
- A certified copy of the lease agreement or title deed for the business premises.
- Operating Policies which includes anti-money laundering and combating financing of terrorism.
- Evidence of fitted Closed Circuit Television (CCTV) cameras at all strategic locations of business premises.
- Proof of payment for a nonrefundable license fee of TZS 1 million.
It is important to note that the nonrefundable license fee has been reduced from the previous amount of TZS 2 million as specified in the repealed 2019
Regulations.
CONDITIONS FOR CLASS A AND CLASS B BUREAU DE CHANGE AND VALIDITY OF LICENSE
Applicants of Class A and Class B Bureau de Change license must meet the prescribed conditions within 6 months of obtaining provisional approval from the Bank of Tanzania. These conditions includes; submission of a Bank statement confirming the allocated paid-up capital, a certified copy of the lease agreement or title deed for the business premises and providing proof of payment for a nonrefundable license fee of TZS 1 Million.
Moreover, the Class A Bureau de Change applicants who plan to engage in money transfer business are required to submit, among other documents, evidence of a non-interest-bearing deposit of USD 100,000 for entities with foreign majority shareholding, or USD 50,000 for entities with local majority shareholding. Also, they must submit a certified copy of a respective agreement between the Bureau de Change and mobile money operators, banks, financial institutions or international money transfer agent depending on the case at hand.
Upon meeting all the stipulated requirements, the Bank of Tanzania will grant the respective license, which will remain valid unless suspended or revoked by the Bank of Tanzania.
CHANGE OF OWNERSHIP
Any change of ownership of Bureau de Change must first obtain approval of the Bank of Tanzania before effecting these changes with the Registrar of Companies. thereafter the licensee is required to notify the BoT within 7 days after such change is registered with the Registrar of Companies
LICENSE FEES
The Regulations imposes an annual license fees for Class A and Class B license of TZS 500,000 for each operating Branch of the Bureau de Change. Class C license is exempted from annual license.
CAPITAL REQUIREMENTS
The Bureau de Change must begin its operations with paid up capital and maintain at a minimum of owners’ equity of not less than TZS 1 Billion for Class A Bureau de Change with majority foreign shareholding while Class A Bureau de Change with majority local shareholding must have a minimum owners equity capital of TZS 500 Million. As for Class B Bureau de Change the minimum capital is TZS 200 Million. Conversely, the regulations have not prescribed capital requirements for Class C (Hotels) Licenses.
The regulations prohibit Injection of additional capital without notifying the Bank of Tanzania. In addition, a Bureau de Change is required to always maintain a working capital equivalent of no less than 70% of its owners’ equity.
OPENING OF BRANCH
Class A Bureau de Change can open a branch anywhere in Tanzania but upon prior approval by the Bank of Tanzania.
Before granting the approval, the Bank of Tanzania must satisfy itself that the Bureau de Change is financially sound, has an integrated system to process information of all of its branches and is capable of consolidating and preparing statutory returns including annual financial statements, among others.
Equally, the Bureau de Change must have a good track record of compliance with laws and regulations of doing business in Tanzania.
TRANSFORMATION TO CLASS A BUREAU DE CHANGE
The Regulations allows holders of Class B Bureau de Change licenses to transition to a Class A Bureau de Change license upon application and approval by the Bank of
Tanzania. The Application for transformation from Class B License to Class A must meet all the criteria and requirements of Class A.
CLASS C BUREAU DE CHANGE
The 2023 Regulations have introduced Bureau de Change licensing opportunity for hotels with 3 stars ranking or above in Tanzania. Specifically, hotels with 3 stars ranking or above planning to engage in Bureau de Change activities must apply for a Class C license with the Bank of Tanzania.
The application must be submitted in writing to the Bank of Tanzania accompanied by, among others, a copy of a valid license for conducting hotel business, and evidence of a rating as a three-star hotel or above, issued by the relevant authority.
The Regulations also requires Hotels with class C license must maintain foreign exchange transactions separately from other Hotel operations. More importantly, they must establish documented procedures for the detection and reporting of money laundering incidents in compliance with anti-money laundering and combatting financing of terrorism laws and regulations.
GOVERNANCE OF BUREAU DE CHANGE
Class A or Class B Bureau de Change must have a Board of Directors composed of not less than 2 Members. Any appointment to the position of Chief Executive Officer, Board member, or Branch Manager must be approved by the Bank of Tanzania. Like wise, termination of the Chief Executive Officer or head of branch must be communicated in writing to the Bank of Tanzania within 7 days of the post falling vacant stating the reason thereof.
SCOPE OF OPERATIONS OF BUREAU DE CHANGE
A Bureau de Change is required to deal with spot transactions and the payments for sale and purchase of foreign currency may be made through, cash, a bank, financial institution, or mobile money operator; or other payment instrument as may be approved by the Bank of Tanzania.
In addition, a Class A Bureau de Change may engage in money transfer service as a subagent of an international money transfer agent or a mobile money operator.
More importantly, a Class A or Class B bureau de change is allowed to carry out business as an agent of a bank, financial institution, insurance company, mobile money operator, or other financial services upon approval of the Bank of Tanzania.
A Bureau de Change is allowed to sale foreign currency for any purpose and in any amount provided that such transaction is supported by relevant documentation.
It is also the requirement of the law that Bureau de Change must display the foreign exchange buying and selling rates and any other charges. A notice informing customers that they are entitled to an electronic fiscal receipt for any purchase or sale of foreign currency or any other service rendered is also required to be displayed.
BUSINESS RELOCATION
The general public must easily access a Bureau de Change. Any relocation of a business must have the prior approval of the Bank of Tanzania and payment of relocation fee of TZS 1 Million.
Further, the closure of the Bureau de Change head office or branch temporarily or permanently requires notification stating reasons to the Bank of Tanzania within three days from the date of closure. It should be noted that the temporary closure shall not exceed 6 months.
SECURITY DEPOSIT
A Bureau de Change engaging in money transfer service must deposit with the Bank of Tanzania a non-interest bearing deposit to be held as security for money transfer service in the following manner.
- USD 100, 000 for a Class A Bureau de Change with foreign majority shareholding.
- USD 50,000 for a Class A Bureau de Change with local majority shareholding.
In the event a Bureau de Change ceases to carry out money transfer service, the Bank of Tanzania may utilize the deposit to offset any claims against the Bureau de Change by customers for unremitted funds.
CUSTOMERS ACCOUNT AND REFUSAL TO SELL
The Regulations impose an obligation to Bureau de Change to maintain both foreign currency account and a local currency account in the name of the Bureau de Change with a bank or financial institution in the Tanzania with the words
“Customers’ Account” added to the title of the account. The Customers account should only be used for money transfer transaction and not otherwise.
The Regulations prohibits Bureau de Change from refusal to sell foreign currency to a Customer unless such foreign currency is not available.
SALE OF FOREIGN CURRENCY TO NON-RESIDENTS
The sale of foreign currency to nonresidents is generally prohibited. However, on exception, A Bureau de Change can sell foreign currency to a non-resident upon proof that the Tanzania Shillings were obtained in Tanzania from the sale of foreign currency or other lawful activities (the source) only with proper identification and retention of record.
INTERNATIONAL MONEY TRANSFER
The Regulations Permit Class A Bureau de Change to undertake international money transfer. But, international money transfer can be done only when the applicant submits relevant information/documents such as
- relevant invoices incase of importation,
- a letter or invoice from respective educational or medical institution, in the case of education or medical expenses;
- a certified copy of a valid work permit or an employment contract, in the case of expatriate proceeds;
- a certified copy of pension award letter and employment contract, in the case of retirement benefits;
- contractual documents, invoices or fee note and certification of settlement of tax obligations, in the case of consultancy or royalty;
- any other relevant documents depending on the nature of the request.
- in the case of dividends and profits to foreign shareholders, audited reports indicating declared dividends or profits to be repatriated and documents confirming payments of all relevant taxes; or
The Bureau de Change is not allowed to process transfers for investment purposes outside member country of the East African Community (EAC) or Southern African Development Community (SADC).
DATA COLLECTION, MANAGEMENT AND RETENTION
A Bureau de Change is required to maintain a sound management information system that facilitates efficient collection and processing of statistical data and information, and which shall be capable of providing audit trail for its own use by internal and external auditors and the Bank of Tanzania .
A bureau de change must submit periodical written reports as required by the Bank of Tanzania as well as ensure that all events within the business premises are recorded on a real time basis and daily CCTV footage is stored for a minimum period of 6 months.
DUTY OF CONFIDENTIALITY AND CONTROL OF SUSPICIOUS TRANSACTIONS
A bureau de change is obligated to conduct its business with confidentiality. However, a Bureau de Change is also required to identify and report all the conspicuous transactions in line with anti-money laundering and combating financing of terrorism laws.
INSPECTION
The Bank of Tanzania is allowed to conduct inspection of a Bureau de Change with or even without notice. In that regard, a bureau de change must, within a specified time during the inspection, submit any record and information requested by the Bank of Tanzania.
OFFENCES AND PENALTIES
In the event the Bureau de Chance is in breach of the law or regulations or any directive, Bank of Tanzania may-
- suspend operations of the bureau de change for a period not exceeding 1 year;
- impose penalty not exceeding the equivalent of USD 3,000; or
- revoke license of the bureau de change.
The revocation of Business License can be done where the Bureau de Change or any of its officers-
- obtain foreign currency illegally;
- has been convicted by a court for fraud or offences relating to dishonesty; or
- submit false information during or after the processing of the application for license.
