Forex trading is a lucrative investment opportunity for traders around the world but unfortunately has also gained a shady reputation because of unscrupulous brokers and companies that cheat their customers.
A number of governments around the world have turned up the heat on the forex market in recent times to stop forex frauds and clean up the illegal forex trading market.
Several East African countries have recently decided to take a firm stand against those indulging in illegal forex trading in the region.
Tighter Regulations Being Imposed
The region’s central banks and governments have moved forward with stringent regulations to curb the rise of illegal forex trading. However, these efforts are also seen as a way to slow down the growth of the market. Many experts point out that forex trading may increase inflation and weaken local economies. Both of these concerns are something that these East African countries want to avoid since their economies are not very strong.
Tanzania is one of these countries which is currently going through a rough patch. For the past 10 months, the country has recorded an average depreciation of 2.2 percent. At the end of November, the Tanzanian shilling was 2,291.7 to the US dollar, a drop from the beginning of the month’s 2,281.5.
Tanzania has already begun a crackdown on the illegal forex trading within its borders. It has just finished a six-month investigation that revealed rampant fraud in the local forex market, with many traders participating in money laundering.
This is why the government started a swift crackdown on the local market. It has frozen the licensing of new forex bureaus and arrested some key traders. They have also stopped commercial banks from trading with the forex market. The military was used in the crackdown, while the central bank officially led the raid.
Rwanda, Uganda, and Kenya Follow Suit
Tanzania is not the only country cracking down in East Africa. Rwanda has the National Bank, the police, and the Local Government Ministry working hand-in-hand to curb the spread of illegal forex trading. Arrests have already been made with strict penalties being enforced on those caught. Uganda, on the other hand, has been shutting down illegal forex operations since 2015 and continues to step up its efforts.
Kenya’s Capital Markets Authority (CMA) has issued a warning to investors after learning several traders were operating without a license. In addition, Kenya has a $50,000 dollar fine and imprisonment waiting for illegal forex traders who are trying to operate in the country. These stiff penalties are a result of the latest changes to the country’s trading laws.
In a statement, Paul Muthaura, chief executive of the CMA said
The Authority will take appropriate enforcement action against any persons or entities illegally conducting online foreign exchange trade or collecting client funds in contravention of these regulatory provisions.
