Why BoT is cracking down on forex shops

Arusha. Suspicion of money laundering and associated illegal transactions is the main reason behind Monday’s closure for inspection of foreign exchange shops in Arusha.

Investigations involving various state agencies are currently underway, and those who will be implicated will be prosecuted, Bank of Tanzania (BoT) governor Florens Luoga said in Arusha yesterday.

“They will be charged in court, and at the same time have their licences revoked,” he said, adding that the closure of forex outlets in Arusha for inspection was part of a countrywide crackdown against money laundering and forex traders operating without licences.

Prof Luoga said BoT suspended issuance of licences for forex shops three months ago until after new regulations aimed at curbing illegal foreign exchange transactions are put in place. Shop owners suspected to have violated the regulations will have their licences revoked until investigations are complete.

“They have to surrender their licences as investigations are being conducted. Those implicated in the earlier operations also have to hand over their licences. In the event they are cleared, they will have to abide by new regulations,” Prof Luoga said.

However, the central bank governor’s clarification on the surprise closure two days ago of bureaux de change in Arusha, the country’s tourism hub, left more questions than answers amid mounting anxiety among players in forex trading.

For instance, Prof Luoga declined to take questions from journalists, who were eager for more details about the unprecedented measure, which has prompted uncertainty in the travel and tourism industries.

None of the several hoteliers and tour operators contacted yesterday was ready to openly speak out on the operation.

“Of course, I’m not amused, but I don’t want to be quoted in the media. This is a very sensitive issue, and I wouldn’t like to antagonise the government,” said a hotelier who asked not to be identified.

Prof Luoga did not say during his hastily convened news conference at Mount Meru Hotel why Arusha was the starting point of what he said was the third phase of a “special audit operation”, and whether it would be extended to other parts of the country.

He defended the deployment of soldiers during Monday’s operation, saying the Police Force was preoccupied with providing security during this year’s Form Two national examination.

Prof Luoga said the operation involved at least 100 officials from the central bank and other state agencies. However, he did not say how many shops were involved in the exercise.

In contrast to Monday, there were no military personnel keeping vigil at forex shops yesterday, and most, if not all, remained closed, leaving anxious customers without access to currency exchange services.

Prior to the BoT crackdown launched earlier this year, there were about 30 bureaux de change operating in the city’s central business district.

There were several more on the city’s outskirts, particularly in supermarkets and upmarket residential areas. At least a dozen have since closed down.