CLYDE & CO UPDATER: THE FOREX REGULATIONS 2023

In this legal update, we discuss key highlights of the Foreign Exchange (Bureau de Change) Regulations of 2023 (the 2023 Regulations), which came into force on 6 October 2023 and revokes the Foreign Exchange (Bureau de Change) Regulations of 2019 (the 2019 Regulations). All bureaux de change licensed by the Bank of Tanzania (BoT) to operate in Tanzania are required to comply with the 2023 Regulations.

Licence Requirements, Prohibitions and Eligibility

Engaging in a bureau de change business without a valid licence issued by the BoT remains prohibited, as stipulated in Regulation 3 of the 2023 Regulations. Violating this requirement constitutes a criminal offence which attracts a penalty of TZS 4 million (~USD 1,600), or imprisonment for a term of up to 14 years, or a combination of both.

Naming Requirements and Ownership and Name Changes

Eligibility for a bureau de change licence is extended to entities that meet specific criteria, including being a company limited by shares or a hotel incorporated under the laws of Tanzania Mainland or Zanzibar.

Licencees must include the terms "bureau de change," "forex bureau," or "foreign exchange bureau" in their business name. In the event of change of name, it should be registered with the Registrar of Companies and thereafter notified to the BoT within 14 days from the date of registration. Any change of ownership must be granted prior approval by the BoT and thereafter the licencee is required to notify the BoT within 7 days after such change is registered with the Registrar of Companies.

Classification of Bureau de Change Licences

The 2023 Regulations introduce 3 classes of bureau de change licences:

• Class A – this licence allows the licencee to deal in spot transactions, money transfer and other financial services related activities (such as agency banking and mobile money agency). It can be granted to either local or foreign owned entities. Minimum capital required is TZS 1 billion (~USD 400,000) for majority foreign owned entities and TZS 500 million (~USD 200,000) for majority local owned entities.
• Class B – this licence allows the licencee to deal with spot transactions only and requires 100% local shareholding. Minimum capital required is TZS 200 million (~USD 80,000).
• Class C – this licence can only be granted to hotels and allows the licencee to deal with spot transactions only with customers of the hotel.

The Regulations define “spot transaction” 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.

Further, a bureau de change is required to always maintain a working capital equivalent of no less than 70% of its owners’ equity.

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