Forex Bureau

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Forex bureaus must observe anti-money laundering and counter-terrorism financing measures when providing remittance and payment services in and outside Kenya.

A licensing program for Forex Bureaus was established in 1995 to stimulate competition in the foreign exchange market and narrow the spread in the market. The Central Bank of Kenya Act (Cap 491) regulates forex bureaus in their capacity as authorised dealers.

You must follow the Central Bank of Kenya’s guidelines to set up a forex bureau in Kenya. You will receive a license to run a forex bureau after complying with all the requirements. Below are the steps to start a forex bureau in this country.

What is the Forex bureau?

A forex bureau is a window of an authorised bank where the public can buy and sell major convertible currencies;

The Kenyan central bank introduced foreign exchange bureaus in 1995 to enhance efficiency in the forex market. Capital transactions are restricted to foreign exchange only in the following circumstances:

For both companies and individuals, foreigners may not invest more than 75 percent on shares listed on the NSE, as of July 2002; and

Kenyan residents who wish to invest more than US$500,000 outside of Kenya must have their investments approved by the Central Bank through the facilitating bank.

Procedure to start a Forex Bureau

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Here are the steps if you want to apply in person for the FX bureau in Kenya

  1. To register for a Forex Bureau license, you need to do a name search at the Registrar of Companies and reserve the name of the Forex Bureau.
  2. Obtain an appropriate name from the Registrar of Companies and request approval from the Central Bank. If the name is to have the words “Forex Bureau,” “Foreign Exchange Bureau,” or “Bureau de Change,” it should incorporate those words.
  • The name search and reservation process takes one day, and the fee for the process is Ksh.1000.
  1. When the Central Bank has approved the firm’s name, you must register it with the Registrar of Companies.
  2. To apply for a Forex Bureau License, one must complete and submit the prescribed Forex Bureau License Application form: FORM /CBK /FXD /1.
  3. The Registrar of Companies should book a suitable name, and the Central Bank should approve it. For example, you can call it “Forex Bureau,” “Foreign Exchange Bureau,” or “Bureau de Change.”

Go to the Central Bank’s website to obtain the Application For or Renewal of Licence to Transact Foreign Exchange Business – FORM / CBK /FXD /1.

  1. When you have filled out the application form, you should send it to the Director, Bank Supervision Department, Central Bank of Kenya
  2. Application forms and all required documents must be submitted with the prescribed application fees. Among them are:
  • For new licenses, it is mandatory to pay Kshs 20,000, and for outlets of existing forex bureaus, it is compulsory to pay Kshs 10,000 (both in bankers’ checks payable to the Central Bank of Kenya).
  • Certified copies of the applicant’s statement of affairs.
  • An official copy of the applicant’s articles of incorporation.
  • A certified copy of the applicant’s certificate of incorporation.
  • Proof of current membership in Kenya Forex Bureau Association (KFBA).
  • A feasibility study should include financial projections for three years (balance sheet, profit, and loss statement, cash flow statement) and information about organisational structure and physical location.
  • At least US$60,000 in core capital or its equivalent in Kenya shillings must exist before operations may begin and must be maintained during operations.
  • Shareholder and director bank statements for the six months preceding the application date.
  • Fill out the necessary fit and proper forms for the bureau’s directors, officers, and shareholders.
  • The company’s shareholders, directors, and officers will receive credit reports from the credit reference bureau.
  • It’s a declaration that no directors and shareholders have ever been declared bankrupt participated in the management of an institution that has collapsed or was found guilty of any offense involving fraud, money laundering, tax evasion, or any other form of dishonest behavior.
  • In addition, the applicant should state that no director or shareholder in the applicant holds a similar position or role in another forex bureau.
  • As part of the Application, the applicant must guarantee compliance with all provisions of the Central Bank of Kenya Act, the Regulations, the Forex Bureau Guidelines, and any instructions/directions issued by the Central Bank of Kenya concerning the establishment and operation of forex bureaus.
  • Any other information the Central Bank of Kenya may require.
  1. The Central Bank’s Inspectors will then perform inspections to determine the documents’ compliance, relevance, and scope.
  2. The Registrar of Companies should book a suitable name, and the Central Bank should approve it. Foreign Exchange Bureau, Bureau de Change, or Forex Bureau should be part of the name.
  3. General, all aspects of an organisation’s structure, functions, activities, and programs must be explained, defined, and illustrated in the document.
  4. Ensure to register a suitable name with the Registrar of Companies and apply for approval at the Central Bank.
  • They must demonstrate how the organisation will comply with the Regulations and how the terms of approval will be continuously maintained after certification, such as conducting internal audits and making necessary changes.
  1. The Central Bank shall issue within 90 days of lodging the Application
  2. a) Request additional information to aid the Application’s processing.
  3. b) After confirming that all requirements have been met, send a letter of intent instructing the applicant to:

(i). I. Pay a banker’s check for Ksh 65,000 to the Central Bank of Kenya for the license fee; (ii). Incorporate the US$30,000 non-interest-bearing deposit into the Central Bank of Kenya; iii). Obtain permission from the Central Bank of Kenya to inspect the location before the business is started.

  1. If the Central Bank meets the above requirements or otherwise, it shall: (a). grant the license to the applicant; or
  • Advise the applicant that the application has been declined and that the unsuccessful applicant may appeal the denial to the Central Bank within 30 days from the date it was informed.

Required documents

The following documents are required to get a license for the forex bureau in Kenya

  1. Copies of a statement of affairs certified by the applicant.
  2. Copies of the applicant’s articles of association and its memorandum.
  3. Incorporation certificate of the applicant.
  4. It should include three years of financial performance (balance sheet, profit and loss account, cash flow statement), organisational structure, physical location, and postal address.
  5. At least US$60,000 in core capital or equivalent in Kenyan shillings must exist.
  6. For the six months preceding the date of Application, the bureau’s shareholders and directors must submit their bank statements.
  7. For each shareholder, director, and principal officer, fully completed fit and proper forms.
  8. An organisation’s shareholders, directors, and officers receive credit reports from a credit reference agency.
  9. The applicant must certify that none of its directors or shareholders has ever been declared bankrupt, worked in a failed institution, or been convicted of fraud, money laundering, tax evasion, or any other act of dishonesty in a court of competent jurisdiction in Kenya or elsewhere.
  10. The applicant must state that none of its directors and shareholders are employed by any other forex bureau with similar responsibilities.
  11. A written undertaking of compliance by the applicant with the Central Bank of Kenya Act, Regulations, Forex Bureau Guidelines, and any instruction/direction issued regarding the establishment and operation of forex bureaus by the Central Bank of Kenya.
  12. The Central Bank of Kenya may also require other information.
  13. Fee receipt for prescribed applications. All fees are payable to the Central Bank of Kenya in bankers’ checks.

Eligibility

  • An individual can use this Application to conduct foreign exchange transactions in Kenya.
  • Authorised dealers in Kenya can only conduct foreign exchange business
  • To promote competition in foreign exchange markets and narrow exchange rate spreads in Kenya, Forex Bureaus were established and first licensed in January 1995.

Fees

  • 1000 is the fee for searching for and reserving the name.
  • The application fee is Ksh 20,000 for a new license and Ksh 10,000 for an outlet of an existing forex bureau — neither is refundable (payment is by bankers check made out to the Central Bank of Kenya).
  • It costs Ksh 65,000 to acquire a license.

Validity

  • It is valid for one year.
  • If not revoked earlier, a license issued under this section expires on the 31st of December following the date of issue, unless earlier revoked.

Inspection of a Forex bureau

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  • A foreign exchange bureau may have its books of accounts, registers, and other documents inspected by the Central Bank of Kenya at any time in its premises under the Central Bank of Kenya Act. Its duties include ensuring compliance with Kenyan laws, licensing terms and conditions, and operating instructions and guidelines, and may conduct an audit of the bureau, initiate a federal investigation, or impose a financial penalty on the bureau.
  • Every foreign exchange bureau officer is required to conduct an examination. It must be conducted promptly. The examining officer is required to obtain these books of accounts and any other records in the foreign exchange bureau’s custody or under its control and furnish statements and information about the bureau’s affairs.
  • For forex bureaus to provide auditors and Central Bank of Kenya examiners with audit trails, they must maintain a sound management information system to make it easy to collect accurate, up-to-date statistical data and information.
  • Suppose reasonable suspicion is raised that a business is being conducted in violation of these guidelines. In that case, the Central Bank of Kenya may enter any premises where a financial institution is carrying on a business.
  • A forex bureau that fails to produce books, accounts, records, documents, correspondence, statements, or other specified information shall be given 14 days to demonstrate the reason why it should not be revoked of its license to carry on foreign exchange business under the Central Bank of Kenya Act.
  • A foreign exchange bureau may have its books of accounts, registers, and other documents inspected by the Central Bank of Kenya at any time in its premises under the Central Bank of Kenya Act. Its duties include ensuring compliance with Kenyan laws, licensing terms and conditions, and operating instructions and guidelines, and may conduct an audit of the bureau, initiate a federal investigation, or impose a financial penalty on the bureau.
  • Every foreign exchange bureau officer is required to conduct an examination. It must be conducted promptly. The examining officer is required to obtain these books of accounts and any other records in the foreign exchange bureau’s custody or under its control and furnish statements and information about the bureau’s affairs.
  • For forex bureaus to provide auditors and Central Bank of Kenya examiners with audit trails, they must maintain a sound management information system to make it easy to collect accurate, up-to-date statistical data and information.
  • Suppose reasonable suspicion is raised that a business is being conducted in violation of these guidelines. In that case, the Central Bank of Kenya may enter any premises where a financial institution is carrying on a business.
  • A forex bureau that fails to produce books, accounts, records, documents, correspondence, statements, or other specified information shall be given 14 days to demonstrate the reason why it should not be revoked of its license to carry on foreign exchange business under the Central Bank of Kenya Act.
  • As a result of a central bank inspection or investigation, the central bank of Kenya may ask a bureau to take remedial measures that it may deem necessary.
  • By notice in writing, the Central Bank of Kenya might request that a bureau provide information to it in such a form and such a manner as it might specify for purposes of assessing compliance with these guidelines.

Bottom line

According to the Central Bank of Kenya Act, a foreign exchange bureau is a limited company licensed to conduct foreign exchange business. The Central Bank of Kenya conducts foreign exchange transactions, including purchasing and selling currencies, traveler’s cheques, and other instruments approved by it. Foreign exchange bureaus may only carry out spot transactions. An authorised dealer in gold, a lender of funds, a current account holder, a broker of forwarding contracts, or a broker of letters of credit is not permitted for foreign exchange bureaus. In Kenya, foreign exchange businesses operated by commercial banks licensed to operate banking are not subject to these guidelines.

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