Tanzania’s Central Bank Responds to Online Lending Fraud with Regulatory Reforms
The Bank of Tanzania addresses a major online scam involving the Leo Beneath London company, resulting in multiple arrests. The bank distanced itself from the entity, clarifying it has not licensed LBL. New regulations for microfinance and digital lending are proposed to enhance consumer protection and operational oversight, with a public feedback deadline set for June 30.
The Bank of Tanzania (BoT) confronted a recent scandal involving an online fraud scheme as it intensifies its efforts to tackle rampant digital fraud. Law enforcement arrested at least 17 individuals linked to Leo Beneath London (LBL), a purported movie promotion entity operating a Ponzi scheme. This company is also incorporated in the UK as Leo Beneath Tanzania (LBT) and attracted customers by promising financial returns for viewing movie clips and recruiting new members.
Arrests occurred in regions including Dar es Salaam, Morogoro, and Mbeya, highlighting the serious nature of the scheme where consumers paid joining fees ranging from Tsh50,000 ($20) to Tsh540,000 ($207). LBL’s deceptive practices included claims of partnerships with major film studios and a points system that would allow users to earn more through recruitment, resembling a pyramid scheme. Hundreds may have fallen prey to these tactics, prompting police to investigate the total number of victims and the funds involved.
In response to increasing scrutiny, the Bank of Tanzania publicly distanced itself from LBL, asserting that it neither licensed nor approved the company. Bank governor Emmanuel Tutuba issued a statement clarifying, “The Bank of Tanzania would like to inform the public that it has not engaged in any discussions or issued any directives to license or allow operations of a company named Leo Beneath London (LBL).” Legal action is being pursued against LBL officials for their unauthorized financial activities.
Last week, the BoT proposed new regulations to enhance oversight in microfinance and digital lending operations. These draft guidelines aim to replace regulations from 2019 and include requirements for company licensing, operational standards, and penalties for misconduct, with feedback expected by June 30.
Key changes will mandate that database servers are hosted within Tanzania, prohibit simultaneous operations across multiple platforms, and establish local language requirements for communication. Furthermore, the minimum capital for foreign-owned microfinance entities will now be set at Tsh500 million ($192,000), while local firms will only need Tsh20 million ($7,700). Non-citizens wishing to operate must register a local company and are limited to employing five foreign nationals, pending central bank approval.
The BoT will also enforce rigorous policies regarding lending practices, debt recovery, and compliance with consumer protection laws, ensuring that local interests are prioritized in Tanzania’s financial landscape. These steps indicate a proactive approach to establish a safer digital environment and protect consumers from fraudulent schemes.
In summary, the Bank of Tanzania has taken significant measures in response to a burgeoning online fraud crisis, particularly the Leo Beneath London case, highlighting the need for stricter regulations in the digital lending sector. With new guidelines proposed, the bank aims to cultivate a safer, more trustworthy financial environment while addressing past failures in regulatory oversight. The strict enforcement of these regulations seeks to protect consumers and curb illicit activities effectively.
Original Source: www.zawya.com
