The Bank of Tanzania has suspended the exchange of Kenyan shillings in their banking system. The move follows Kenya’s decision to fight illicit financial deals by demonetizing the KSh1,000 bank notes.
A letter sent by the Directorate of financial sector supervision and addressed to all banks and financial institutions in Tanzania indicated that the bank will no longer accept Kenyan Currency. The bank also suspended repatriation of all Kenyan currency into the country.
The Central Bank of Kenya is keen to stop illegally acquired money from getting into the financial sector. Therefore, it is working with financial regulators in neighbouring countries to prevent unlawful transactions. Banks in Tanzania have been instructed to enhance their due diligence when handling money from or going into Kenya.
Businesses operating between Kenyan and Tanzania will be affected by the decision as they will be unable to move cash between the two countries. Trade of goods and services between Kenya and Tanzania is likely to decline in the period the suspension will be in effect.