Hunting for currency speculators: new fines and rules of game

The National Bank for several years has been trying in vain to fight against speculation in the currency market. Solution was found - this week new penalties for illegal currency transactions came into force.

Fine better than license

At the beginning of September, 359 exchange offices officially worked in Kyrgyzstan. Although in reality there are more than 1,000. Exchange offices were checked 166 times. As a result, there have been issued  two warnings and 35 orders. Licenses of 18 exchange bureaus have been suspended, and two - withdrawn.

However, the country has exchange offices that are working without any documents. Since the beginning of the year 67 people have paid 98,000 fines for the currency exchange without a license.

But the violations revealed - a drop in the ocean of ​​shadow operations of exchange offices. While the National Bank staff checks one, others are already closed. Owners of illegal business were not afraid of fines. What is 1,500-2,000 soms for them?

"Nature of exchange offices - speculative. Exchange offices have limited capital. When it is missing, exchange offices begin to "speculate for rise," Chairman of the National Bank of the Kyrgyz Republic Tolkunbek Abdygulov said.

Lack of reliable data on the volume of transactions in the cash currency market and effective mechanisms for prevention of violations reduced the effectiveness of its regulation. The risk for the banking system, especially during periods of volatility in exchange rates, increased.

Market is key

Most illegal exchange offices are located in the major markets of the country - Dordoi and Kara-Suu. This is understandable: the flow of money here is inexhaustible, entrepreneurs from the neighboring countries come, everyone needs currency exchange. It is unlikely that a Kazakh or Uzbek businessman will ask for a license. The main thing - to quickly exchange money, buy goods and leave.

"We succeeded in partly solution of the problem at Dordoi market. We agreed with market leadership that all points of sale, which are caught on the currency exchange without a license, will be closed and the containers will be dismantled," chief inspector of the inspection of financial institutions department of the National Bank Ravshanbek Murzaliev says.

Ease as way to control

One can't say that the National Bank controls the market only by punitive methods. Not at all. To take exchange offices out of the shadow, on the contrary, work rules are being weakened.

For example, in 2015 the National Bank temporarily reduced the minimum requirements for working capital from 1 million to 500,000 soms. In July 2016 the decision of the Board of the National Bank of the Kyrgyz Republic abolished till the end of the year the requirements for the provision of supporting documents on the origin of the working capital.

"Reporting requirements for exchange offices have been revised and simplified. It created an Internet portal that allows reporting directly to the National Bank in real-time mode," Ravshanbek Murzaliev said.

This innovation will ensure the transparency of the exchange offices' activity. In addition, the National Bank will be able to efficiently monitor operations in the foreign exchange market. The requirement to provide daily data on foreign exchange transactions for exchange offices was introduced from July 1, 2016.

It is not new for the financial sector. Such data NBKR every day receives from commercial banks, microfinance institutions and credit unions. The essence of the work is simple. National Bank gives access to the website, and one can send data from computer or mobile phone.

Impact on wallet

However, not everyone is ready to use ease and innovations. Legal exchange offices, of course, had time to evaluate the benefits. But they are only one-third of the total market. "Shadow" exchange offices don't want to share "hard-earned money" voluntarily. That's why strict measures are used.

National Bank twice initiated a bill to increase penalties for the exchange offices. But at first, the deputies rejected it.

NB KR waited six months and again submitted the document to Parliament. Having drawn conclusions from the mistakes, the National Bank has entrusted the deputies to initiate the document. It worked - the deputies supported the document. And on June 22 amendments to the Code of the KR "On administrative responsibility" were signed by the President.

The new penalties come into force on September 29, 2016.

The fine for carrying out banking operations without a license:

- For citizens - 100,000 soms;

- For officials - 150,000 soms;

- For legal entities - 250,000 soms.

The fine for violation of banking legislation:

- For citizens - 20,000 soms;

- For officials - 50,000 soms;

- For legal entities - 100,000 soms.

"Amendments to the Code "On administrative responsibility" and regulations of the National Bank didn't discourage the entrepreneurs form desire to engage in currency exchange. On the contrary, the number of incoming applications for licenses compared with previous years has increased," Ravshanbek Murzaliev says.

At the same time, the National Bank says it doesn't intend to organize the persecution. Even the "shadow" exchange offices have a chance to enter into the legal field without scandals and problems. One only needs to apply with the necessary documents to the National Bank of the Kyrgyz Republic for getting a license. It allows carrying out foreign exchange transactions legally.