Background
Under the Foreign Exchange Act, 1992 (the Act), the Bank of Tanzania (BOT) has mandate to formulate, implement and be responsible for monetary policy, including foreign exchange matters in Tanzania. Section 7 of the Act vests the BOT with powers to make regulations, rules, orders, or directions in relation to foreign exchange in Tanzania. The Circular is issued pursuant to this section.
All foreign exchange authorised dealers operating in Tanzania are required to comply with the Circular effective from 7 August 2020 (the Effective Date).
Directives on Foreign Exchange Operations
The key directives that must be complied with by all foreign exchange authorised dealers, as set out in the Circular, are:
- All foreign exchange transactions above USD 250,000 per transaction in the retail market must, at all times, be traded within the interbank foreign exchange market prevailing quoted prices. With respect to transactions of a single customer in a day, these must be summed up for purposes of determining the amount.
- Over the next six months (from the Effective Date), the minimum tradable currency on a given quoted price is reduced to USD 50,000 from USD 250,000.
- Banks are prohibited from buying foreign currency from exporters with whom they have no account relationship. As such, sale of foreign currency by exporters shall be made through banks which the exporters maintain their accounts.
- Trading of foreign exchange in retail markets is restricted to prices quoted by banks and bureaux de change as displayed on boards.
- Trading of foreign exchange with international foreign currency brokers who are not licensed in Tanzania is prohibited.
- All foreign exchange dealers are reminded to observe Know Your Customer (KYC) procedures in undertaking foreign exchange transactions.
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