Banks Toughen Up
Mar 04, 2003
SOME local foreign exchange bureaux have found themselves at a disadvantage, because of Bank of Uganda’s (BOU) latest moves to limit fraud. <br>
By Steven Odeu
SOME local foreign exchange bureaux have found themselves at a disadvantage, because of Bank of Uganda’s (BOU) latest moves to limit fraud.
BOU recently issued new guidelines to all banks concerning illegal activities such as money laundering. Money laundering involves ‘cleaning’ money derived from criminal activity through the international banking system.
Last month, Barclays Bank wrote letters to three forex dealers, terminating their telegraphic money transfer arrangements with the bank.
“Over the years, we have allowed transactions to be undertaken on behalf of third parties via organisations such as yourselves. Regrettably, as a result of new compliance measures which are to be enforced across banks, we will be unable to carry out such transaction on your behalf,†Frank Griffith, Barclays Bank managing director said in a letter to Ahmed Tejani, the Lloyds Forex Bureaux managing director.
In 1992, local forex bureaux were licensed to operate as telegraphic transfer (TT) agencies, but through commercial banks.
Most of the 80 bureaux use TTs to supplement income on the unpredictable forex market.
“We are definitely getting a raw deal from our Central Bank. This is another way of keeping us out of business,†Tejani told The New Vision on Friday.
He said Barclays Bank has made the first move and all major banks are likely to follow suit.
Stephen Mwanje, chairman Uganda Forex Bureau Association (UFBA) said they appreciate the need to fight money laundering, but view the Barclays Bank move as not being in good faith.
“Barclays is using this line to deny the bureau access to this line of business (TT). Our fear that the force behind this move will use his position to influence other banks is not far-fetched,†Mwanje said in a letter to Mutebile Tumusiime, the BOU Governor.
“We request your intervention, because we believe this move which is intended to kill off the bureaux, may result in washing away all the benefits hitherto derived from a fully liberalised forex market,†Mwanje wrote.
However, in reply BOU insists, “These are to guide financial institutions in establishing specific policies and procedures to guard against use of Uganda’s financial system for money laundering purposes. If a financial institution has reasons to be suspicious of some transactions of its customers and declines to do business with them, the institution would be within its rights,†David Opiokello, deputy BOU Governor, replied.
“The fear that Barclays’ MD will use his position to influence other banks does not arise in our view. BOU does not therefore see the justification to intervene as you requested,†Opiokello said.
Tejani said, Barclays Bank had for long been trying to find ways of terminating their dealings with some forex bureaux, but were given a cold shoulder by BOU. He said, big banks were not happy with the growing market share of bureaux in this business, which he placed at 50 percent.
“These banks claim that we do money laundering is unfounded, because they are the ones that authenticate the papers and then authorise the transfer. The final decision in the TT business is for banks,†Tejani said.
He added, “Most of our customers are Dubai based. In the process of sending money to suppliers, they are going to get high charges from the banks. To recover this they will have to charge high prices for goods, which will affect the economy.†Ends
SOME local foreign exchange bureaux have found themselves at a disadvantage, because of Bank of Uganda’s (BOU) latest moves to limit fraud.
BOU recently issued new guidelines to all banks concerning illegal activities such as money laundering. Money laundering involves ‘cleaning’ money derived from criminal activity through the international banking system.
Last month, Barclays Bank wrote letters to three forex dealers, terminating their telegraphic money transfer arrangements with the bank.
“Over the years, we have allowed transactions to be undertaken on behalf of third parties via organisations such as yourselves. Regrettably, as a result of new compliance measures which are to be enforced across banks, we will be unable to carry out such transaction on your behalf,†Frank Griffith, Barclays Bank managing director said in a letter to Ahmed Tejani, the Lloyds Forex Bureaux managing director.
In 1992, local forex bureaux were licensed to operate as telegraphic transfer (TT) agencies, but through commercial banks.
Most of the 80 bureaux use TTs to supplement income on the unpredictable forex market.
“We are definitely getting a raw deal from our Central Bank. This is another way of keeping us out of business,†Tejani told The New Vision on Friday.
He said Barclays Bank has made the first move and all major banks are likely to follow suit.
Stephen Mwanje, chairman Uganda Forex Bureau Association (UFBA) said they appreciate the need to fight money laundering, but view the Barclays Bank move as not being in good faith.
“Barclays is using this line to deny the bureau access to this line of business (TT). Our fear that the force behind this move will use his position to influence other banks is not far-fetched,†Mwanje said in a letter to Mutebile Tumusiime, the BOU Governor.
“We request your intervention, because we believe this move which is intended to kill off the bureaux, may result in washing away all the benefits hitherto derived from a fully liberalised forex market,†Mwanje wrote.
However, in reply BOU insists, “These are to guide financial institutions in establishing specific policies and procedures to guard against use of Uganda’s financial system for money laundering purposes. If a financial institution has reasons to be suspicious of some transactions of its customers and declines to do business with them, the institution would be within its rights,†David Opiokello, deputy BOU Governor, replied.
“The fear that Barclays’ MD will use his position to influence other banks does not arise in our view. BOU does not therefore see the justification to intervene as you requested,†Opiokello said.
Tejani said, Barclays Bank had for long been trying to find ways of terminating their dealings with some forex bureaux, but were given a cold shoulder by BOU. He said, big banks were not happy with the growing market share of bureaux in this business, which he placed at 50 percent.
“These banks claim that we do money laundering is unfounded, because they are the ones that authenticate the papers and then authorise the transfer. The final decision in the TT business is for banks,†Tejani said.
He added, “Most of our customers are Dubai based. In the process of sending money to suppliers, they are going to get high charges from the banks. To recover this they will have to charge high prices for goods, which will affect the economy.†Ends