The Bank of Tanzania has distanced itself from Leo Beneath London (LBL), a suspected Ponzi scheme disguised as a movie promotion agency, leading to the arrest of 17 individuals. Amid rising digital fraud, the central bank is implementing new regulations for microfinance operations to enhance transparency, licensing, and consumer protection, with a feedback deadline set for June 30.
This week, the Bank of Tanzania (BoT) distanced itself from a public scandal connected to online fraud as it seeks to combat ongoing digital scams. Seventeen individuals were arrested in a nationwide police operation targeting Leo Beneath London (LBL), a company allegedly operating a Ponzi scheme disguised as a movie promotion agency.
Those linked to LBL, also known as Leo Beneath Tanzania (LBT), were detained in Dar es Salaam, Morogoro, and Mbeya for soliciting customer deposits to join an online program that promised earnings from viewing short movie clips for a fee. The program falsely claimed partnerships with major film studios, enticing members with the potential to recover and exceed initial joining fees ranging from Tsh50,000 ($20) to Tsh540,000 ($207).
Participants were misled into believing they could increase their earnings through recruitment, resembling a typical pyramid scheme. Authorities estimate that numerous individuals fell victim to this scheme, and they are currently assessing the scale of the fraud and the total funds lost.
The investigation into LBL coincides with intensifying scrutiny of Tanzania’s microfinance sector, amidst calls for enhanced measures to tackle misconduct. Consequently, the central bank took the unusual step of publicly clarifying on February 24 that LBL operated without its authorization. “The Bank of Tanzania would like to inform the public that it has not engaged in any discussions or issued any directives to license or allow operations of a company named Leo Beneath London (LBL), contrary to various reports circulating online,” stated BoT Governor Emmanuel Tutuba.
The BoT noted legal action against the company’s officials for participating in fraudulent activities, including unauthorized deposit mobilization and financial transactions. In light of recurrent issues, the central bank issued new regulations for microfinance operations, soliciting public feedback before enactment on June 30.
The forthcoming regulations aim to replace the 2019 guidelines and will govern licensing, operational requirements, unfair lending practices, and penalties for violations. The rules stipulate that primary database servers for digital lending must be located within Tanzania and forbid operators from managing multiple platforms simultaneously, mandating the use of Kiswahili as the primary language.
Additionally, the minimum capital requirement for non-deposit taking microfinance entities has been established at Tsh500 million ($192,000) for firms with majority foreign ownership and Tsh20 million ($7,700) for those with majority local ownership. Enhanced oversight will be directed at lending policies, loan collateral mandates, repayment procedures, and adherence to consumer protection regulations.
For foreign entities wishing to enter the non-deposit taking microfinance sector, establishing and registering a local company will be necessary, with a limit of five foreign employees allowed, requiring the central bank’s approval. The BoT will only approve additional non-citizen employees if there are no qualified Tanzanians available and if particular conditions justify the need for extra personnel.
In conclusion, the Bank of Tanzania is taking decisive action to address the recent online lending fraud scandal linked to Leo Beneath London, emphasizing its absence of association with the company. The central bank’s proposed regulations aim to enhance the integrity of the microfinance sector while ensuring compliance and consumer protection. Continued efforts are critical to safeguard against fraudulent schemes and protect Tanzanian citizens.
Original Source: www.zawya.com
