Regulatory Alerts2012-01-01
Bank of Zambia Guidance on Foreign Currency Cheques for Licensed Non-Bank Financial Service Providers
The Bank of Zambia issued Circular No. 12/2012 to clarify that commercial banks must accept foreign currency cheques involving licensed non-bank financial service providers. This directive addresses the adverse impact on authorized financial services and payment systems caused by some banks previously refusing such instruments. The guidance mandates that banks exercise standard due diligence only when both the drawer and payee are unlicensed entities.
# BANK OF ZAMBIA
## OFFICE OF THE DEPUTY GOVERNOR - OPERATIONS
**July 31, 2012**
**CB Circular No:** 12/2012
**To:** All Financial Service Providers
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## GUIDANCE ON THE TREATMENT OF FOREIGN CURRENCY CHEQUES UNDER STATUTORY INSTRUMENT 33, THE BANK OF ZAMBIA (CURRENCY) REGULATIONS, 2012
Following the coming into effect of the Statutory Instrument 33, the Bank of Zambia (Currency) Regulations, 2012, it has come to the attention of the Bank of Zambia that some commercial banks have stopped accepting foreign currency denominated cheques issued by or paid to non-bank financial service providers licensed by the Bank of Zambia. These actions have adversely affected the provision of duly authorised financial services and have potential to disrupt the payment system.
In view of the foregoing, the Bank of Zambia has found it necessary to clarify that, as financial intermediaries, non-bank financial service providers licensed by the Bank of Zambia are authorised by their licences to pay to, or receive from, their customers foreign currency in the ordinary course of their licensed businesses. For the avoidance of doubt, as duly licensed financial intermediaries, non-bank financial service providers are authorised to issue foreign currency leases, loans and advances and, in some instances, take foreign currency deposits. Therefore, commercial banks where non-bank financial service providers maintain accounts are hereby guided to accept foreign currency cheques where the payee or drawer is a financial service provider licensed by the Bank of Zambia. This will prevent unnecessary disruption to the payments system.
However, in instances where both the payee and the drawer to a foreign currency cheque are not licensed financial service providers, commercial banks should exercise the usual customer due diligence to ensure that only legitimate payments are processed.
Further guidance on this matter can be obtained by contacting either the Director - Bank Supervision or the Director - Non-Bank Financial Institutions Supervision.
Please be advised accordingly.
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**P. P. Bwalya K. E. Ng'andu (Dr)**
**DEPUTY GOVERNOR - OPERATIONS**
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Bank square, Cairo Road P.O. Box 30080, Lusaka, Zambia Tel: 260-211-226844, 260-211-228888/9 Fax: 260-211-237070 E-mail: bngandu@boz.zm http://www.boz.zm
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