Tanzania’s Central Bank Acts Against Online Lending Fraud

The Bank of Tanzania has distanced itself from a fraud case involving Leo Beneath London and has arrested several individuals allegedly running a Ponzi scheme. The bank is under pressure to address fraud in microfinance and has announced new regulations aimed at enhancing oversight and consumer protection. Significant changes include local data requirements and capital thresholds for companies.

The Bank of Tanzania (BoT) has distanced itself from a recent online fraud scandal involving Leo Beneath London (LBL), amidst rising digital fraud concerns. Law enforcement has apprehended at least 17 individuals in various regions, suspected of orchestrating a Ponzi scheme disguised as a movie promotion agency. Allegations include soliciting deposits from customers to partake in viewing short films for monetary rewards, promising returns exceeding initial investments ranging from Tsh50,000 ($20) to Tsh540,000 ($207).

The company falsely claimed partnerships with leading film studios, incentivizing participants with points for each view and encouraging member recruitment, indicative of a pyramid scheme. Despite hundreds reportedly being deceived, police are still assessing the total number of victims and financial losses. This case highlights the growing pressure on the BoT to curb fraud in Tanzania’s microfinance lending sector, which has become increasingly problematic.

In response, the central bank issued a public notice asserting it had never authorized LBL’s operations, clarifying its legal stance against the company’s officials for engaging in unlicensed financial activities. New regulations on digital microfinance operations are set to be enacted by June 30th, aiming to enhance oversight and consumer protection. These regulations will ensure that company databases are housed locally, limit lenders to single platforms, and enforce the use of Kiswahili as the primary language.

Minimum capital requirements for non-deposit-taking microfinance entities will be revised: Tsh500 million ($192,000) for firms with majority foreign ownership, and Tsh20 million ($7,700) for majority local firms. The regulations will emphasize compliance in various aspects of lending and consumer protection. Non-citizens wishing to establish businesses in this sector will need local incorporation, with stringent employment restrictions for foreign workers. The new framework aims to improve regulatory oversight and protect local consumers effectively.

The recent crackdown on the fraudulent operations of Leo Beneath London by the Bank of Tanzania underscores the institution’s commitment to combatting digital fraud. The implementation of new regulations aims to enhance microfinance operations and consumer protection, thus addressing the growing challenges posed by unauthorized lending practices. By enforcing stringent rules regarding business operations, the BoT seeks to cultivate a safer financial environment for citizens.

Original Source: www.zawya.com