Tanzania freezes exchange of Kenyan currency

Kenya's new currency notes. [Standard]

The Tanzanian Government has banned the exchange of its currency with that of Kenya as it moves to lock out illicit inflows into the country.

The order, contained in a notice dated June 7, comes in the wake of the introduction of new banknotes by the Central Bank of Kenya (CBK) in what is meant to stamp out corruption and illegal cash flows.

“The Central Bank of Kenya has suspended currency conversion and repatriation of all Kenyan currency to restrict illicit flows into the Republic of Kenya. Further, the Bank of Tanzania has been advised to freeze CBK currency collection account with immediate effect,” said Bank of Tanzania’s Directorate of Financial Sector Supervision in the notice to commercial banks.

CBK Governor Patrick Njoroge had insisted on the gradual withdrawal of the Sh1,000 notes to October 1 while the rest of the denominations would operate as legal tender while being phased out.

Led to panic

Njoroge in a press briefing a day after the launch of the currency on Madaraka Day said Kenya wanted to avoid the Indian crisis where a quick withdrawal of demonetised currency led to panic.

Dr Njoroge said they had communicated with “sister” central banks in the region who would work as a fraternity to ensure dirty money finds its way back into the country.

It is expected that some of the illicit money may have already crossed the border into neighbouring countries, with holders exchanging it in banks and forex bureaus in the interdependent economic bloc.

CBK said those holding less than Sh1 million can exchange their units at Commercial banks, CBK branches and currency centres or at any commercial bank.

Cash above Sh1 million and up to Sh5 million will be exchanged at a holder’s respective bank, where they will have to declare its source in line with anti-money laundering laws.