New exchange bureau laws force new services
Banks are reducing the number of exchange points ahead of new laws coming into force on October 1 which will prohibit currency exchange activities for exchange points working outside bank offices.
The Central Bank struggle with exchange bureaus stems from widespread fraud and irregularity identified in the sector with fraudulent processes misleading customers about exchange rates. It prohibited the opening of new exchange bureaus from May 11 and instructed the closure of bureaus or their expansion to provide a range of banking services rather than simply the exchange service.
Mikhail Sukhov, Director of licensing and credit institution rehabilitation at the Bank of Russia says bank exchange offices have fallen by 140 in the weeks leading up to the new laws.
“Banks exchange points account for 3.5% of all exchange bureaus. By October 1 the banking part of exchange bureaus will be reduced to zero. However, that does not mean winning control over the shadow segment of the currency exchange business.”
Few banks are re opening bureaus says Alexey Terekhov Director of the Department of Banking Audit PFK, as opening new branches involves more expenditure
“According to Central bank data, 91 bureaus out of 164 exciting have been closed down and only 73 bureaus have been converted into a full service bank branch. The fact that banks are reluctant to convert their exchange bureaus into another bank branch indicates inefficiency and high unproved expenditures of that alternative. Most of the separate bureaus were operating in specific locations which are not attractive for opening a bank branch.”
Nicholay Polunin Member of the Board of BCC Moscow argues that the recent regulations can help get rid of illegal transactions.
"Those banks for whom the currency exchange shadow business make sense and generates income will take the alternative of converting their goldmine into another branch with expanded service and extra operating cash decks. That will definitely reduce the amount of illegal exchange bureaus working under the banks name, but give more opportunity for banks to expand their shadow business”
The Central Bank will monitor the regulation adherence with a possible involvement of law enforcement authorities said Sukhov
“We noticed that there are illegal cases when outsider exchange bureaus illegally operate under the banks name. The regulation and investigation of legality of the business will be performed by other law authorities”