Commercial banks in Somalia were ordered by the central bank to shut down an undisclosed number of forex-related accounts without explanation. Local media outlets claim that any decision to do so would be in line with the Somali Central Bank’s past warnings about foreign exchange trading.
Despite its struggling economy, a handful of FX brokers are brazenly chasing business in a gray area of the country’s trading sector, even as Mogadishu regulators vow to wipe out such activities.
In order to guarantee the security of Somalis’ funds, the central bank said it will monitor accounts being used for FX broking services and may impose restrictions including the closure of such accounts.
Just yesterday, the central bank released a circular to financial institutions asking them not to hold banking accounts for any firms involved in currency trading.
“This is to inform you that the Board of Directors of the Somali Central Bank, in its 43rd session held on 28-10-2019, has issued resolution number 43/G, which directs all private commercial banks in the country to close the accounts of all Foreign Exchange (Forex) traders,” the statement signed by the bank’s Deputy Governor, Maryam Abdullahi Yusuf said.
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FX trading grows across Africa
“The Central Bank hereby instructs the concerned banks to implement this resolution and further provide the central bank with an appendix on these accounts and the amount of money they are holding,” it further states.
Earlier in October, Somali security forces raided online forex centers in Mogadishu. They raided three offices of a company called Camel Online Forex and directed the staff to stop operations and close their business.
Those actions, however, have not stopped locals trading forex on platforms operated by foreign brokers, which appear to be exploiting regulatory loopholes, notably that their business is based offshore.
There is currently no regulatory framework governing online forex trading in Somalia. However, it is estimated that a few hundred local investors are participating through offshore brokers. Somali immigrants are also aggressively targeted over social media by introducing brokers and other representatives of the industry.
Retail forex trading has seen huge growth across Africa in recent years, with Nigeria and South Africa are the two largest African markets, but other nations have also seen a massive surge in interest from the public.