Forex Bureaus: Details of the Little-Known Currency Trading Business in Kenya

Forex Bureau, Foreign Exchange Bureau, and Bureau de Change are all related terms that describe businesses in the foreign exchange or FX market that conduct spot foreign currency transactions, trading a currency and another, and other instruments on the guidelines of the Central Bank of Kenya (CBK).

Spot foreign currency transactions is a term in forex that describes foreign currency exchange that takes place immediately after the completion of payment by a client at an agreed price.

Forex Bureaus were established in Kenya in 1995 by the Central Bank of Kenya under the CBK Act Section 33K provisions to encourage the development of the foreign exchange market and moderate the forex spread in the country’s customary economic conditions.

After this move, the first ever forex exchange company Aristocrats Forex Bureau Ltd, located at Kenindia House along Loita Street in Nairobi, was registered on January 1, 1995, followed by others like Bay Forex Bureau (Nairobi) Ltd, Downtown Cambio Forex Bureau Ltd, Link Forex Bureau Ltd, and Nairobi Bureau De Change Ltd, in that year.

Since then, a lot more Forex Bureaus have joined the business, and according to data from Kenya Forex & Remittance Association (KFRA), formerly Kenya Forex Bureaus Association (KFBA), which promotes and enhances best practices among forex bureaus in Kenya by ensuring they comply with Foreign Exchange Regulatory Policies and Guidelines, they have 119 members in their directory and counting…

Kenya has a global financial outlook with a variety of businesses from finance and trade in its economic dynamo Nairobi, agriculture in Rift Valley to maritime shipping in Mombasa. This industry diversity helps the country to thrive – one of the factors that spur the growth of Forex Bureaus, which largely depend on cross-border transactions and finance.

The foreign exchange sector is lucrative. If you are looking forward to starting a Forex Bureau in Kenya, here are the requirements and everything you need to know before venturing into the foreign exchange business:

How to start a Forex Bureau in Kenya

This is a simple guide on how to start your forex exchange business in Kenya. It stipulates all the processes you need to undertake to ensure your Forex Bureau is registered properly and legally compliant.

Step 1: Register your business

No person shall transact foreign exchange business except an authorized dealer with a valid license issued by the Central Bank of Kenya, the CBK Forex Bureau Guidelines of 2011 reads.

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The CBK has enacted strict rules and exchange controls for Forex Bureaus to manage emerging market issues, among them money laundering, which can bring about exchange rate volatility. Therefore, before starting a forex exchange company in Kenya, you must meet these requirements;

* Register a limited liability company with the words ‘Forex Bureau,’ ‘Foreign Exchange Bureau,’ or ‘Bureau De Change’ as part of its business name

* Have fully paid up shares (core capital) amounting to $60,000 or its Kenyan shillings equivalent, maintained at the reserve of the company at all times

* Have an extra checking account (non-interest bearing) holding $30,000

* The identified Forex Bureau location should be in a strategic place, accessible to the public

* You should not be a shareholder of any other Forex Bureau

Take note that the registration of foreign exchange business names is done with the Registrar of Companies upon writing to the CBK, seeking approval of the same. After receiving the green light to continue with the process, it is time to get the license.

Step 2: Apply for a Forex Bureau license

The application to obtain a license that authorizes the operations of a Forex Bureau in Kenya is done after a feasibility study by certified project managers to assert its financial viability by analyzing elements like the premise and coming up with a projected success score.

It’s followed by submitting a duly filled FORM/CBK/FXD/1 to the Director of the Bank Supervision Department at CBK alongside the applicant and shareholders’ copies of bank statements dated six months before the date of registration, certificate of incorporation, statements of affairs, a declaration form showing that the interested parties have never been convicted of an economic crime or bankrupt and a Credit Reference Bureau (CRB) report.

The application fee for a Forex Bureau license is Ksh20,000, a non-refundable fee payable to the Central Bank of Kenya in the form of a banker’s cheque.

Within 90 days, CBK will give an update on the application, requesting additional information if the provided is unsatisfactory. CBK will only grant a license if the applicants meet the specified guidelines, upon which it will issue a letter of intent with instructions to pay the Forex Bureau license fee of Ksh65,000, deposit the $30,000 non-interest bearing CBK account, and invite officers from the monetary authority to inspect their business premises.

The Forex Bureau license is valid for one calendar year, and on its issue, applicants must carry out the forex exchange business within the first six months lest it is revoked if there is no written consent sent to the CBK.

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Unsuccessful applicants will receive a note with pointers on the knockback. They can reapply for review within 30 days from the date thereof. The decision to decline the application arises when the applicant or the shareholders have earlier held an office that was liquidated due to a financial crunch or engaged in fraud activity.

Step 3: Operations of Forex Bureaus in Kenya

After getting the license to operate a Forex Bureau, it’s time to take advantage of the market swings and make money from the foreign exchange business in Kenya on spot exchange rates, as directed by the Central Bank of Kenya.

Forex exchange companies in Kenya buy and sell foreign currency drafts from and to customers of amounts not above $1,000. Forex Bureaus are barred from selling foreign currency to foreigners unless they have proof that the Kenyan shilling at hand was acquired legitimately in a business activity or by trading another currency.

Further, the Central Bank of Kenya assents Forex Bureaus to conduct telex transfers of up to $100,000 per customer per day, so long as the transactions are not indicatively splintered for deliberate reasons.

While giving insights into the foreign exchange market in Kenya, the founder of Nairobi Bureau De Change Limited, Ms Violet Kairu, said that Forex Bureaus are also capped to trading $10,000 with individual customers.

“If you buy money over ten thousand dollars which is sort of an equivalent to a million shillings, you must fill in the KYC self-declaration forms at the banks,” she said.

Forex Bureaus are not allowed to trade in gold, act as a loan facility by lending money, hold current accounts of customers, transact in third-party cheques, or take part in forward markets.

However, they can be agents of financial services companies such as WorldRemit, Western Union, Remitly, and MoneyGram on CBK’s mandate.

Renewal of a Forex Bureau license

After the lapse of one calendar year, which runs from January 1 to December 1, a Forex Bureau license expires. So, how do you renew it? First, you must download the FORM/CBK/FXD/1, fill it and submit it to the Central Bank of Kenya with a renewal fee of Ksh20,000, accompanying tax compliance certificates, updated CRB reports of shareholders, and Kenya Forex & Remittance Association membership certificate.

To get a renewed license, the Forex Bureau must have operated in line with the set standards by CBK and pay the licensing fee and outstanding dues in full. Application to renew the license is carried out at least two months before the date of expiry.

Those who wish to apply for a new outlet are charged an application fee of Ksh10,000.

In conclusion, Forex Bureaus are only allowed to operate two foreign currency accounts with local banks. However, when a forex exchange company opens a branch in an area not served by the authorized banks, it can open another two similar accounts in any other two banks within that area.

Also, forex exchange companies must have an operating balance same as $4,000 in cash in their daily business operations. Lastly, a Forex Bureau is prohibited from having accounts in another country. We thought you should know.