Assistant Commissioner of Police (ACP) Costa Joseph Habyara, the director of Financial Investigations Unit (FIU), a Rwanda National Police unit attached to the National Bank of Rwanda to fight money laundering and terrorism financing, noted that the operations are informed by the fact that there are “cases of malpractices in foreign exchange trade mainly related to black markets operators.”
“It is clear… only licensed companies like banks and forex bureaus that are authorized to carry out foreign exchange transactions,” ACP Habyara said.
Currently, there are 88 licenced forex bureaus, with about 55 percent of them operating in the City of Kigali.
He outlined hotels, casinos, duty-free shops and travel or tourism companies as the only “non licensed persons or companies allowed to receive foreign currencies” due to their nature of business that deals with non-residents.
In September last year, RNP conducted an operation against illegal forex bureaus and other unlawful businesses related to foreign exchange transactions in which a number of people were arrested and non licenced forex bureaus shutdown.
“Legal and regulatory frameworks have been put in place to regulate the industry towards protecting the stability of Rwandan economy. The regulatory framework includes the penal code, the central bank law and the regulation governing foreign exchange bureaus,” ACP Habyara said.
Article 488 of the penal code states that “any person, who sells or exchanges the national or foreign currency illegally shall be liable to a term of imprisonment of six months to two years and a fine of Rwf200, 000 to Rwf3 million or one of these penalties.”
“Despite the existing of laws and regulations, there are still cases of malpractices in foreign exchange market mainly related to black markets operators, traders transacting in foreign currencies and individuals or companies concluding contracts and pricing in foreign currencies, which we are now up against,” he said.
Economists say such unlawful financial businesses may lead to distortion of foreign exchange market due to speculative transactions; dollarization of the national economy; inflation and reduction of the competiveness of local products in the international market.
“Besides being illegal, it also leads to tax evasion by black market operators; brings in statistical data issue since all black market transactions are not captured, which can also lead to money laundering or terrorism financing.”
He called upon the general public to refrain from any deals with such black markets, instead collaborate with the police by providing information on these malpractices to “protect and preserve our national economy.”
Meanwhile, the Rwanda Forex Bureau Association (RFBA) has welcomed the move to fight related black markets, which they say affects their business.
The association chairman, Zefania Muhigi said they will support the operations to ensure that their business is put to order.
The association advocates for the growth and development of its members while upholding professionalism and enhancing compliance with regulatory policies and guidelines.
“Some association members are either registering losses or making no profits because of such illegal foreign currency trade; actually we have said it before calling for police intervention but we understand they have been conducting these operations for some time now, which we are grateful and happy to support,” Muhigi said.
“Black markets disorganize our work and tarnish the image of our profession in case they cheat or defraud their customers; they are a threat to security in one way or another because they are the source of speculation and counterfeit notes and can lead to money laundering because their capital is not known and uncontrolled,” he added.
“We have a way to regulate inflation; for example, the exchange rate was at $791 today [Tuesday] but it was trending high at $795 on the black market and this fails our efforts to stabilize the currency.”
Muhigi puts the number of people involved in this black market in Kigali to about 150 describing the situation at border posts as “worse.”
He said that recently, he met 68 people of those operating in Kigali in abide to advise them on how legalise their business.
“They argued that they don’t have the required startup capital, but I advised to team up and make an association, which will be much easier for them, but it seems they are not willing to change,” Mihigi said.
Article 4 of the law governing foreign exchange bureaus, partly states that a company or a cooperative intending to apply for a license to operate a foreign exchange bureau shall have a paid up capital not less than Rwf20 million or its equivalent in another currency before commencement of operations which should be maintained at all times.
“They are not registered and not in formal business, yet they are in business; they don’t pay taxes, rent and other required fees; actually we should collectively stand up and help police to top them.