FOREIGN EXCHANGE BUREAUS

FOREIGN EXCHANGE HISTORY IN KENYA

Forex Bureaus were established and first licensed in January 1995  to foster competition in the foreign exchange market and to narrow the exchange rate spread in the market. as authorized dealers, Forex bureaus conduct business and are regulated under the provisions of the Central Bank  Act (Cap 491).
between 1998 and 2004, the Forex Bureau market experienced rapid growth, with the number of operating bureaus increasing to 48 by June 1998, and further to 89 in December 2004. Due to the rising demand by potential investors and to provide an orderly and competitive framework it became necessary to streamline the sector by reviewing the Forex Bureau Guidelines.
at the same time, the  attention of the central Bank was drawn to the fact that several Forex Bureaus had been violating various sections of the Forex Bureau Guidelines, including dealing in third party cheques and telegraphic transfers without the approval of the Central Bank.
in some instances, it was observed that these services may have been abused as avenues for fraud, tax evasion and money laundering.in response to this concern, the Banking Supervision issued Central Bank circular No. 1 of 2005 instructing all Forex Bureaus to cease dealing in telegraphic transfers and third part cheques with immediate effect. Following this action, the Central Bank held discussions with officials from teh Kenya Forex Bureau Association and agreed to develop a framework for strengthening the guidelines in general, and the regulations relating to telegraphic transfers and third part cheques in particular.

the Revised Forex Bureau Guidelines therefore seek to deal with the challenges outlined above, and provide an opportunity for the sector to realign itself in order to enhance competition in the foreign exchange market, and particularly, provide a service to a market segment largely excluded from the mainstream banking sector due to the size and frequency of transactions.