Dozens of Exchange Shops Licensed by CBI

In its bid for a more organized and financially healthy foreign exchange market, the Central Bank of Iran has licensed dozens of new exchange shops since the middle of summer.

The latest additions to the list of moneychangers licensed by CBI shows that 618 bureaux de change are allowed to operate in the forex market, meaning that since the beginning of the fifth month of the current fiscal year on July 23, a total of 68 moneychangers have obtained permits.

The Money and Credit Council, the top-level financial decision-making body, had approved the directive for the founding, operations and supervision over bureaux de change more than four years ago, which places them in two categories, IBENA reported.

The first category consists of exchange shops only permitted to engage in purchasing or selling foreign currencies in cash in addition to trading gold and silver coins. They must have a capital base of at least 50 billion rials ($1.1 million).

The second category includes exchange shops that, in addition to having the capabilities of the first category, are–similar to banks–allowed to issue forex payment orders and linked with SWIFT, the internationally-recognized network that facilitates 24-hour secure exchange of payment instructions between banks, central banks, multinational corporations and major securities firms. They must possess at least 200 billion rials ($4.44 million).

They are also allowed to offer offshore forex services through licensed brokers outside the country and conduct business through banks and credit institutions that have acquired a license from the central bank.  The MCC directive dictates that all bureaux de change must provide bank guarantees equal to half the amount of their latest registered capital.

  Market Watch

Licensed moneychangers are under constant supervision, in person or otherwise. The distant supervision is conducted through the Forex Oversight System that reviews data and information concerning the transactions of bureaux de change while central bank investigators also visit them periodically.

Since over two years, the central bank started officially coordinating with law enforcement and the general prosecutor to crack down on unlicensed bureaux de change, whereby they would ultimately be referred to the police for any violation.

In the wake of the recent volatility in the forex market, the Crime Police have been obligated to identify illegal monetary and banking entities and other natural and legal persons active in the monetary and banking market throughout the country and officially inform CBI on their progress and findings.

As part of the latest communications between CBI and the Crime Police, 427 unlicensed businesses active in the forex market were introduced to the bureau.

As Crime Police Chief Brigadier General Mohammad Reza Moqimi confirms, it has been several weeks since unlicensed moneychangers have faced severe pressure from law enforcement, which is to continue until March.

“It is natural that we make collective efforts in fighting economic offences more actively in the concluding two months of the year (ends March 20) so that in coordination with the central bank and the judiciary, we can identify and tackle those who falsely amp up forex rates,” he also told ILNA.

The police crackdown on illegal moneychangers in downtown Tehran intensified, especially in the past week when in spite of CBI warnings that forex rates will come down by the yearend, increased demand led to US dollar’s exchange rate surpassing an all-time high of more than 46,000 rials. Its rally has since calmed, with rial being quoted at around 45,000 per dollar on Saturday.

Saeid Mojtahedi, the head of the Iranian Association of Moneychangers, also believes that similar to the trend witnessed in the past few years, forex rates will go up and prompt some to “ride the wave”.

“But after the seasonal demand dies down, we will see that those who have directed their money toward the forex market for investment will suffer losses,” he told IRNA.