Tanzania’s Bank Strengthens Regulations Against Online Lending Fraud
The Bank of Tanzania is addressing a significant online lending fraud case involving Leo Beneath London, which has resulted in multiple arrests. The bank has issued a public notice denying ties to LBL and is implementing stricter regulations for microfinance services to enhance oversight and prevent fraud. New operational requirements will focus on local compliance and consumer protection.
The Bank of Tanzania (BoT) has distanced itself from a recent scandal involving online lending fraud while reinforcing measures to combat ongoing digital scams. Recently, at least 17 individuals were arrested in connection with Leo Beneath London (LBL), a company allegedly running a Ponzi scheme under the guise of a movie promotion agency.
The scheme attracted participants by claiming contracts with major film studios to promote movies. Participants paid joining fees, which ranged from Tsh50,000 ($20) to Tsh540,000 ($207), for access to short clips, and were promised earnings based on viewing points and recruitment incentives. Law enforcement suspects it operated as a typical pyramid scheme, drawing in hundreds of victims.
The case has intensified scrutiny on the BoT, which has been under pressure to address misconduct in Tanzania’s microfinance lending sector. On February 24, the central bank issued a public notice denying any endorsement of LBL, clarifying that it had not licensed the company nor sanctioned its operations.
BoT’s statement explained it has taken legal action against LBL officials for their unauthorized financial activities, including deposit collection and interest distribution. The bank has also proposed new regulations for microfinance services, focusing on enhanced licensing requirements and operational standards.
These regulations will replace existing ones from 2019 and are aimed at preventing unfair lending practices while ensuring consumer protection. Key stipulations include that lenders’ servers must be located in Tanzania, prohibition of operating multiple platforms, and use of Kiswahili as the primary business language.
New minimum capital requirements for non-deposit taking microfinance operators have been set at Tsh500 million ($192,000) for foreign-owned businesses and Tsh20 million ($7,700) for local ones. Additionally, tight restrictions will govern the employment of non-Tanzanians in these firms, reinforcing the importance of local company support.
In summary, the Bank of Tanzania is responding to rising concerns around online lending fraud by disassociating itself from suspicious operators like Leo Beneath London. With new regulations set to come into force, the central bank aims to enhance oversight of microfinance services, promote consumer protection, and ensure strict compliance with licensing and operational requirements.
Original Source: www.zawya.com
