Key Changes in Forex Bureau Operations, Remittances, and Payment Instruments
These brief outlines significant changes in Ethiopia’s foreign exchange laws concerning Forex Bureau Operations, International Remittances, and Payment Instruments. These changes are intended to modernize the financial sector, improve foreign exchange management, and facilitate international trade and investment.
On August 8/2024, The National Bank of Ethiopia (NBE) announced the acceptance of applications for Independent Foreign Exchange Bureaus, aligning with the new Foreign Exchange Directive (FXD/01/2024) effective July 29, 2024. These Independent FX Bureaus, eligible for operation by Ethiopian nationals, Non-Resident Ethiopians, or Foreign Citizens of Ethiopian Origin, can buy and sell foreign currency cash notes at freely negotiated rates. Applicants must meet a minimum capital requirement of Birr 15 million and provide a security deposit of Birr 30 million in a blocked account. NBE believes these bureaus will enhance the foreign exchange market and support the market-based determination of exchange rates.
1.1 General
- Authorization: Foreign exchange bureaus must be authorized by the National Bank of Ethiopia (NBE).
- Types of Operations: Bureaus can operate as a specialized window within banks or as independent (non-bank) entities.
1.2 Forex Bureau Requirements
- License Issuance: Conditions for obtaining a license from the NBE.
- Security and Processing: Bureaus must meet specific security and processing requirements.
- Staff Obligations: Staff must adhere to obligations related to forex transactions.
- Exchange Rate Determination: Bureaus must determine and display exchange rates transparently.
- Authority to Sell Foreign Exchange: Bureaus are authorized to sell foreign exchange under specific conditions.
2. International Remittances
2.1 Eligibility to Provide Services
- Authorized Entities: Banks and authorized remittance service representatives can provide remittance services in partnership with International Remittance Service Providers (IRSPs).
- Service Representatives: Include postal services, telecom companies, and payment system operators approved by the NBE.
2.2 Obligations of Representatives
- Service Provision: Must notify the NBE of all service locations and ensure payment within 24 hours to beneficiaries.
- Customer Due Diligence: Conduct due diligence as per anti-money laundering laws.
- Contractual Compliance: Ensure remittance agreements comply with Ethiopian laws.
2.3 Remittance Service Agreements
- Agreement Requirements: Contracts with licensed IRSPs must be approved by the NBE.
- Money Laundering Prevention: Agreements must include procedures to prevent money laundering and terrorist financing.
2.4 Application Process
- Documents Required: Application letter, remittance service provider’s business license, and agreements with partner banks.
2.5 Settlement of Accounts
- Account Settlement: Payments to beneficiaries must be settled when IRSP credits the foreign currency in advance.
- Exchange Rate: Beneficiaries are paid in Birr at the prevailing exchange rate.
2.6 Transparency and Promotion
- Disclosure: Fees and charges must be disclosed to customers.
- Advertising: Services can be advertised through brochures, websites, and embassies.
3. Payment Instruments: Foreign Cards, Cash Notes, and Others
3.1 Issuance of International Debit/Prepaid Cards
- Authorized Banks: Banks must be licensed to issue international cards for travelers.
- Conditions: Banks must have card personalization systems and secure telecom infrastructure.
3.2 Acceptance of International Cards
- Eligibility: Banks must have agreements with international payment networks to accept cards.
- Merchant Agreements: Local merchants must have agreements with authorized banks to accept cards for payments.
3.3 Acceptance of Foreign Currency Cash Notes
- Eligible Entities: Includes hotels, duty-free shops, and other entities serving tourists.
- Licensing Requirements: Must have trained personnel and currency validation machines.
3.4 Retention Rights
- Retention Accounts Scheme: Merchants may apply to retain foreign exchange under specific conditions.
Conclusion
According to the NBE’s press release these Foreign Exchange Reforms in Ethiopia‘s foreign exchange laws aim to enhance the country’s financial infrastructure, promote transparency, and encourage foreign investment. By modernizing forex operations, facilitating remittances, and expanding the use of payment instruments, these reforms create new opportunities for investors and businesses operating in Ethiopia.
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