The Bank of Tanzania (BoT) this week moved to dissociate itself from the latest public scandal involving online fraud in the country, even as it seeks to tame continual digital fraud.

At least 17 people have been arrested over the past week in a nationwide police swoop on the operations of Leo Beneath London (LBL), a company believed to have been running a clandestine Ponzi scheme behind the facade of being a movie promotion agency.

Individuals associated with the company, which is said to also be registered in Britain as Leo Beneath Tanzania (LBT), were apprehended in Dar es Salaam, Morogoro and Mbeya on suspicion of soliciting deposits from customers to join an online programme to watch short movie clips and trailers for payment.

The company claimed to have contracts with major film studios for promotional purposes and members of the programme would be awarded points for each view, setting themselves up for enough future earnings to recoup and exceed the initial joining fees ranging from Tsh50,000 ($20) to Tsh540,000 ($207).

Newcomers were also told they would make more money by recruiting other members into the programme through their own efforts, a process that authorities say pointed to a typical pyramid scheme. Hundreds are believed to have been lured in, although police are still compiling the precise numbers and amount of money extorted.

The LBL case has emerged amid growing pressure on Tanzania’s central bank to effectively address incidents of misconduct and fraudulent activity in the country’s microfinance lending space that have gained traction over the past few years.

The central bank took the rare step of going on the defensive on February 24, issuing a public notice to dispel growing speculation that LBL had been operating with the Bank's official approval."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," said the notice signed by governor Emmanuel Tutuba.

It added that legal action had been instituted against the company's officials "for their involvement in fraudulent activities, including deposit mobilisation, interest distribution and financial transactions without any legal licence from the bank."Just last week, BoT published a set of proposed new regulations for microfinance service operations in the digital and non-deposit taking categories, setting a June 30 deadline for public feedback before they take effect.

The new regulations, which will replace existing 2019 regulations, cover licensing eligibility, criteria, operational requirements and restrictions to prevent unfair lending practices, sanctions and penalties for violations, among other things.

In the digital lending category, emphasis has been placed on ensuring that all primary database servers are located within Tanzania's borders.

Lenders will also be prohibited from operating multiple platforms at a go, and required to use Kiswahili as the only language or default language with English as a secondary option.

For non-deposit taking microfinance service operators, the new minimum capital requirement has been set at Tsh500 million ($192,000) for companies with majority foreign shareholding and Tsh20 million ($7,700) for those with majority local shareholding.

More oversight focus will be placed on company lending policies, loan collateral requirements, repayment and restructuring models, debt collection and recovery practices, and compliance with financial consumer protection laws.

Non-Tanzanian citizens who wish to start a business in the non-deposit taking microfinance service category will be required to establish and register a local company, but restricted to employing no more than five non-Tanzanians at any given time, all of them with prior approval of the central bank.

Under the regulations, BoT will authorise additional non-citizen employees only on the basis of "availability of qualified Tanzanians for the proposed position, complexity of functions and roles to be undertaken, approval granted by Tanzania Investment Centre, emergency situation which may warrant an extra person, and the time the extra person is expected to stay in the institution and impart knowledge to Tanzanians."

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