Economy, Business And Markets

Police to Help Confront Illegal Forex Dealers

Police to Help Confront Illegal Forex Dealers Police to Help Confront Illegal Forex Dealers

The police are set to deal with unauthorized money exchangers in September.

According to Central Bank Governor Valiollah Seif, the district attorney is “pursuing unauthorized bureaux de change and the central bank is cooperating with the police on this.”

The central bank is stepping up pressure on bureaux de change to bring them under its supervisory umbrella. The bank had given these shops a one year deadline to register with the authority. The deadline expires on Aug. 19.

“Many unauthorized bureaux de change have been closed down and many have been dealt with,” Seif told the press Monday evening.

Iran’s foreign exchange system consists of a network of bureaux de change connected to the central bank and mainly concentrated on Ferdowsi Street in Tehran.

Banks have traditionally played a minor role in the market. Their efforts to increase their foreign exchange business were scuttled by sanctions against the Iranian banking system.

Unauthorized foreign exchange shops fall under the anti-foreign currency trafficking law, allowing the central bank to file a lawsuit against any unregistered bureaux de change after the deadline.

“After the deadline, no unregistered bureau can provide foreign exchange services,” Hamid Tehranfar, vice governor for supervision said earlier.

“A lot of bureaux de change are in the process of getting a permit from the central bank, so the bank will counter unauthorized bureaux after Aug. 19,” he said, hinting there would be no extension.

The central bank was weakened by the former president Mahmoud Ahmadinejad. Unauthorized financial institutions spread like virus. This was not limited to bureaux de change. There are nearly 7,000 companies or shops operating outside of the law in Iran, including many credit institutions. There were even a couple of banks on the list until a few months ago.

Together these unauthorized institutions control over a fifth of all the money circulating the Iranian economy. The disruptions these companies create in the financial system are grave. The chaos prompted President Hassan Rouhani last year to empower the central bank to counter these institutions.

The Central Bank of Iran spent the past year hunting illegal lenders and sorting bureau de change permits. The bank even introduced two electronic networks, one for registering foreign exchange transactions and the other for processing checks.

Reform is painfully slow but the bank is making headway—manifested by reduced volatility in the foreign exchange market—though economic conditions have also been greatly in the bank’s favor.