The Central Bank of Kenya (CBK) has issued new guidelines for foreign exchange dealers, allowing them to resume offering a range of services they were banned from providing last June. They will not, however, be able to offer letters of credit (L/C).

The new guidelines aim to make sure the dealers cannot participate in money laundering, tax evasion, fraud or terrorist financing.

Bank concerns

The CBK said it was compelled to ban foreign exchange dealers from certain activities because some of them flouted the old guidelines.

"The attention of the CBK was drawn to the fact that several forex bureaux had been violating various sections of the guidelines, including dealing in third party cheques and telegraphic transfers without the approval of the Central Bank," CBK said in a statement.

New regime

From January 2007 the dealers will be able to resume telegraphic money transfers and third-party cheque transactions.

But they will be under stricter supervision and face harsher penalties if they are found to be violating the new rules.

No L/Cs

Under the new guidelines, foreign exchange dealers will not be able to establish L/Cs, nor will they be allowed to deal in gold, lend money or open current accounts for customers.

Kenya's first foreign exchange bureau was licensed in 1995 and there are now thought to be around ninety such bureaux.

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