Why government shut forex shops

Dar es Salaam. President John Magufuli revealed yesterday that the decision to close some bureaux de change in Dar es Salaam was aimed at plugging loopholes for money laundering and associated illegal transactions.

“You see, someone goes to the Bank of Tanzania (BoT) to get dollars for his forex shop. But when you conduct an audit on how the forex was transacted, you won’t be shown anything,” Dr Magufuli said at State House in Dar es Salaam.

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The President was speaking shortly after receiving the 2018 annual report from the Prevention and Combating of Corruption Bureau (PCCB).

The event also saw to the swearing-in of Tanzania’s ambassador to Cuba, Mr Valentino Mlowola, who was relieved of his position as the PCCB director general last September.

President Magufuli was speaking almost a month after BoT had conducted an inspection audit of business transactions of more than 50 bureaux de change in Dar es Salaam.

The central bank established that most of the bureaux were flouting the procedural and other regulatory frameworks governing the currency exchange business.

As a direct result of that, more than 50 bureaux de change in the city were closed. Since closure of the forex shops, the shilling has remained relatively stable against the US dollar at all the commercial banks.

President Magufuli said the government had no viable option but to close the shops after discovering that they had become hiding holes for “rogue” agents who would buy foreign currency from the BoT at the standard price but were unable to show how they spent the money, or to whom they sold it.

“This is possibly how illicit drug dealers are financing their transactions,” the President said during the event aired live by several broadcasting stations.

With such dubious dealings, the forex shops were also behind the inexplicable depreciation of the Tanzania shilling, Dr Magufuli added.

He said the illegalities were also discouraging prospective investors from investing in the country, adding, however, that Tanzania had enough foreign reserves to cover about five months of imports.

“Steps had to be taken to ensure that the economy remains stable.”

Closure of the forex shops in Dar es Salaam came after a similar exercise was conducted in Arusha Region last November, with more or less similar findings regarding money laundering and tax evasion concerns.