The Central Bank of Kenya (CBK) has again warned citizens against unauthorised foreign-exchange trading as analysts asked for a ban on third-party payment-service providers handling unapproved currency trades.
The warning on the flourishing trade comes two years after stringent rules to protect consumers took effect.
The CBK warned of the unlicensed and unregulated online foreign exchange (forex) dealers and platforms and urged Kenyans to only deal with “genuine and licensed financial institutions and entities.”
The regulator urged consumers to check the licensing status of dealers from the CBK website (www.centralbank.go.ke) and/or CMA website (www.cma.or.ke).
In 2017, new rules took effect requiring Kenya’s online currency traders to obtain a licence from the Capital Markets Authority. Sources, however, say many rogue firms have refused to seek licences, exposing users.
“Many have failed to register. We are warning them first. The business is not illegal but it requires approval. It means clients must be informed about the risks, investing experience, leverage limits; the trader/dealer must be fit and proper, should be formally admitted into a trading platform like LIFFE,” said an official who sought anonymity to speak freely.
To effectively rein in the rogue firms, analysts on Friday urged CBK to issue a decree warning third-party payment-service providers not to handle unapproved currency trading.
“One smart move might be to stop banks accepting instructions to transfer money to these brokers,” said risk analyst Deepak Dave of Riverside Capital who added that there was a precedent in the late ‘90s when pyramid schemes started.
The CMA, the capital markets regulator, earlier estimated about 50,000 people, including brokers, dealers and money managers, are in the business and are mainly using offshore platforms that are not overseen by Kenyan regulators to offer the service.