Bank of Tanzania Intensifies Crackdown on Online Lending Scams…

The Bank of Tanzania has distanced itself from an online fraud case involving Leo Beneath London (LBL), resulting in 17 arrests. This case has heightened calls for the central bank to tackle digital fraud, leading to proposed regulations in the microfinance sector to strengthen oversight and protect consumers.

The Bank of Tanzania (BoT) has distanced itself from a recent online fraud scandal as it intensifies measures against ongoing digital scams. In a coordinated operation, law enforcement has arrested 17 individuals linked to Leo Beneath London (LBL), a company allegedly masquerading as a movie promotion agency while operating a Ponzi scheme. Arrests were made in Dar es Salaam, Morogoro, and Mbeya due to claims that they solicited deposits for a fraudulent online program purportedly providing earnings through viewing movie clips.

LBL falsely advertised partnerships with major film studios, offering participants points for each view to incentivize joining the program for fees ranging from Tsh50,000 ($20) to Tsh540,000 ($207). The structure reportedly encouraged recruitment of new members for higher earnings, resembling a pyramid scheme. Authorities are still assessing the number of individuals involved and the total financial losses incurred.

This incident highlights the increasing pressure on BoT to effectively manage fraudulent activities within the country’s microfinance sector, which has become a growing concern in recent years. In response, the Bank issued a public notice on February 24 to clarify that LBL was not authorized to operate under their supervision, stating, “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 actions have since been initiated against LBL officials for their illicit financial operations.

Additionally, the Bank of Tanzania has proposed new regulations aimed at enhancing oversight of microfinance services. These regulations, set to replace those from 2019, address licensing criteria, operational requirements, and penalties for misconduct. Key stipulations include ensuring primary database servers are located within Tanzania, prohibiting lenders from operating multiple platforms simultaneously, and mandating the exclusive use of Kiswahili.

For microfinance entities not accepting deposits, the new capital requirements have been established at Tsh500 million ($192,000) for companies mainly owned by foreigners and Tsh20 million ($7,700) for those primarily owned by locals. The regulations also impose restrictions on employing non-Tanzanians and emphasize compliance with financial consumer protection laws, indicating a shift towards safeguarding users against exploitation.

In summary, the Bank of Tanzania is taking significant steps to combat online fraud and enhance regulatory measures in the microfinance sector. The arrest of individuals involved in the LBL scam underscores the urgent need for vigilance against fraudulent schemes. With the introduction of stricter regulations, BoT aims to establish a more accountable and safe financial environment for its citizens.

Original Source: www.zawya.com