Tanzania -- Sanctions Compliance Regulatory Overview

Tanzania's approach to cryptocurrency is still developing, with the Bank of Tanzania (BOT) having issued warnings about the risks associated with crypto assets in the past. While a comprehensive regulatory framework specifically for virtual assets and Virtual Asset Service Providers (VASPs) is not yet fully established or operational, Tanzania, as a member of the international community, is bound by international anti-money laundering (AML) and combating the financing of terrorism (CFT) standards, including those related to sanctions.

Therefore, any entity operating with crypto assets in or connected to Tanzania would need to comply with these overarching international sanctions regimes and Tanzania's domestic AML/CFT laws, which transpose these international obligations.

Here's a breakdown:

1. Overarching International Sanctions Frameworks Applicable to Tanzania

Tanzania, as a member of the United Nations, is obligated to implement UN Security Council Resolutions. Additionally, due to the global nature of financial transactions, including those involving cryptocurrencies, OFAC and EU sanctions can have extraterritorial reach and implications for entities operating in Tanzania.

a. UN Sanctions Compliance Requirements for VASPs

• Legal Basis: As a UN member state, Tanzania is legally bound to implement sanctions imposed by the UN Security Council. These sanctions are primarily aimed at combating terrorism, proliferation of weapons of mass destruction, and addressing specific threats to international peace and security.
• Obligations: Financial institutions (and by extension, any entity deemed a "reporting person" under Tanzanian AML law, which could include VASPs if they were formally regulated) must:
  • Screen against the UN Consolidated List: Check customers, beneficial owners, and transaction parties against the UN Security Council Consolidated List, which identifies individuals and entities subject to asset freezes, travel bans, and arms embargoes.
  • Freeze Assets: Immediately freeze funds or other economic resources of designated individuals and entities.
  • Prohibit Transactions: Refrain from making funds or economic resources available, directly or indirectly, to or for the benefit of designated individuals and entities.
  • Report: Report any hits or frozen assets to the relevant authorities (e.g., Financial Intelligence Unit - FIU).
• Relevance to Crypto: If crypto assets are recognized as "funds" or "economic resources" under Tanzanian law, these obligations would directly apply to VASPs. Even if not explicitly recognized, best practice dictates treating them as such to avoid facilitating sanctioned activity.
• Legal Reference:
  • UN Security Council Sanctions Committees: https://www.un.org/securitycouncil/sanctions/committees
  • UN Consolidated List: https://www.un.org/securitycouncil/sanctions/un-sc-consolidated-list

b. OFAC (U.S.) Sanctions Compliance Requirements for VASPs

• Legal Basis: The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) administers and enforces U.S. sanctions programs. While U.S. law, OFAC sanctions have significant extraterritorial reach.
• Why it Applies to Tanzania-based Entities:
  • US Dollar Nexus: Transactions involving the U.S. dollar, even if initiated and completed outside the U.S., often clear through the U.S. financial system, making them subject to OFAC jurisdiction.
  • U.S. Persons Involvement: Any transaction involving a U.S. person (citizen, resident, entity, or branch abroad) or U.S.-origin goods/services (including software or cloud services) makes it subject to OFAC.
  • Secondary Sanctions: Certain OFAC programs include "secondary sanctions" which target non-U.S. persons for engaging in specific activities with sanctioned countries or entities, even if no direct U.S. nexus exists.
• Obligations: VASPs dealing with any U.S. nexus (customers, funds, technology) must:
  • Screen against OFAC Sanctions Lists: Primarily the Specially Designated Nationals and Blocked Persons (SDN) List, but also other lists like the Non-SDN Palestinian Legislative Council List, Sectoral Sanctions Identifications (SSI) List, etc.
  • Block/Reject Transactions: Block property and interests in property of SDNs and reject prohibited transactions involving sanctioned jurisdictions or entities.
  • Report: Report blocked property and rejected transactions to OFAC.
• Relevance to Crypto: OFAC has explicitly stated that its sanctions apply to virtual currency transactions and has designated cryptocurrency addresses associated with sanctioned entities.
• Legal Reference:
  • OFAC Website: https://home.treasury.gov/policy-issues/office-of-foreign-assets-control-sanctions-programs-and-information
  • OFAC SDN List: https://home.treasury.gov/policy-issues/financial-sanctions/specially-designated-nationals-and-blocked-persons-list-sdn-human-readable-lists
  • OFAC Guidance on Virtual Currency: https://home.treasury.gov/system/files/126/virtual_currency_guidance_final.pdf

c. EU Sanctions Compliance Requirements for VASPs

• Legal Basis: The European Union imposes sanctions (restrictive measures) based on common foreign and security policy decisions.
• Why it Applies to Tanzania-based Entities:
  • EU Persons/Entities: Transactions involving EU citizens, residents, or entities (including subsidiaries or branches of EU companies).
  • EU Financial System Nexus: Transactions routed through the EU financial system.
  • EU-Origin Technology: Use of EU-origin technology or services.
• Obligations: VASPs with an EU nexus must:
  • Screen against EU Sanctions Lists: Check against the EU Consolidated Financial Sanctions List.
  • Freeze Assets: Freeze funds and economic resources of designated individuals and entities.
  • Prohibit Transactions: Refrain from making funds or economic resources available to designated parties.
  • Report: Report any hits to relevant EU member state authorities.
• Relevance to Crypto: The EU's 6th AML Directive and upcoming MiCA (Markets in Crypto-Assets) regulation explicitly bring VASPs under AML/CFT and sanctions compliance obligations.
• Legal Reference:
  • EU Sanctions Map/Database: https://www.sanctionsmap.eu/
  • EU Consolidated List of Persons, Groups and Entities Subject to EU Financial Sanctions: While not a single direct public list like OFAC's SDN, the EU Sanctions Map provides access to relevant regulations.

2. Tanzania's Domestic AML/CFT Framework and Crypto

While Tanzania does not have a comprehensive, dedicated regulatory framework for cryptocurrencies as a form of currency or financial instrument, its existing AML/CFT laws provide the legal basis for implementing international sanctions.

• Key Legislation:

  • The Anti-Money Laundering Act, 2006 (as amended): This is the primary law combating money laundering. It designates "reporting persons" (financial institutions and certain non-financial businesses and professions) who are obliged to implement customer due diligence (CDD), record-keeping, transaction monitoring, and suspicious transaction reporting (STR) measures. While VASPs may not be explicitly listed, if they offer services that fall under the broader definitions of financial services or property, they could be captured.
  • The Prevention of Terrorism Act, 2002 (as amended): This act provides the legal framework for combating terrorism financing, including measures for freezing assets of designated terrorist organizations and individuals.

• Key Regulators:

  • Bank of Tanzania (BOT): The central bank, responsible for monetary policy and financial sector regulation. It has issued warnings regarding crypto assets but has also explored potential regulatory approaches.
  • Financial Intelligence Unit (FIU): The national center for receiving, analyzing, and disseminating suspicious transaction reports (STRs) and other financial information related to money laundering and terrorist financing.

• Current Stance on Crypto: The BOT has generally maintained a cautious stance, warning the public about the risks associated with investing in and using cryptocurrencies, often citing their speculative nature, volatility, and lack of regulation. In 2021, the former President hinted at the need to prepare for and potentially regulate crypto, but concrete steps for a full regulatory framework for VASPs are still pending.

• Implication for Crypto (if permitted/regulated): If VASPs were to operate under a formal regulatory framework in Tanzania, they would be designated as "reporting persons" and would be subject to:

  • Customer Due Diligence (CDD) and Know Your Customer (KYC): Identifying and verifying the identity of customers and beneficial owners.
  • Ongoing Transaction Monitoring: Scrutinizing transactions for suspicious activity.
  • Sanctions Screening: Screening customers and transactions against national and international sanctions lists.
  • Suspicious Transaction Reporting (STR): Reporting any suspicious activities or transactions to the FIU.
  • Record-Keeping: Maintaining records for a prescribed period.

• Legal References:

  • The Anti-Money Laundering Act, 2006 (and amendments): Available through Tanzania's Parliament website or legal databases. (Example via National Assembly: http://www.parliament.go.tz/polis/uploads/bills/1474278458-Bill%20No.3%20of%202019%20The%20Anti-Money%20Laundering%20(Amendment)%20Act,%202019.pdf - Note: always check for the latest consolidated version)
  • The Prevention of Terrorism Act, 2002 (and amendments): (Similarly, via Parliament website)
  • Bank of Tanzania Website: https://www.bot.go.tz/
  • Tanzania Financial Intelligence Unit (FIU) Website: http://www.fiu.go.tz/

3. Sanctioned Entity Screening Obligations

Entities operating in Tanzania that deal with financial transactions, including those potentially involving crypto assets, are expected to screen all relevant parties against:

• UN Security Council Consolidated List: For individuals and entities designated under various UN sanctions regimes.
• OFAC Sanctions Lists: Primarily the SDN List, given the extraterritorial reach and potential USD nexus.
• EU Consolidated Financial Sanctions List: Relevant if there's any EU nexus.
• Domestic Lists: The Tanzanian FIU, in conjunction with the National Counter Terrorism Centre (NCTC) and other security agencies, would likely maintain or circulate a list of individuals and entities designated domestically under the Prevention of Terrorism Act for asset freezing. This list would primarily transpose UN designations.

Screening should cover:

• Customers (during onboarding and throughout the relationship)
• Beneficial Owners
• Senders and Receivers of funds/crypto assets
• Other counterparties in transactions

4. Geographic Restrictions

Sanctions regimes impose restrictions on dealings with specific countries or territories. These include:

• UN-Sanctioned Countries: Countries subject to comprehensive UN sanctions (e.g., North Korea, Iran for certain aspects, etc.).
• OFAC-Sanctioned Countries: Countries subject to broad U.S. embargoes (e.g., Cuba, Iran, North Korea, Syria, certain regions of Ukraine).
• EU-Sanctioned Countries: Countries subject to comprehensive EU sanctions.
• High-Risk Jurisdictions: While not a "sanction," VASPs should also exercise enhanced due diligence for transactions involving jurisdictions identified by FATF as having strategic AML/CFT deficiencies (e.g., those on the FATF "grey list" or "black list").

Transacting with individuals or entities located in, or associated with, these jurisdictions, or sending/receiving crypto assets from wallets linked to these regions, carries significant sanctions risk.

5. Penalties for Violations in Tanzania

Violations of AML/CFT laws in Tanzania, which would include failure to comply with sanctions obligations, can result in severe penalties under the Anti-Money Laundering Act and the Prevention of Terrorism Act. These typically include:

• For Individuals: Substantial fines and/or terms of imprisonment.
• For Corporate Entities: Large fines, revocation of licenses (if applicable), and reputational damage.
• Confiscation of Assets: Assets involved in money laundering or terrorist financing activities may be subject to confiscation.

The specific penalties vary depending on the severity of the offense and whether it involves money laundering, terrorism financing, or failure to report.

6. Country-Specific Sanctions Lists for Crypto in Tanzania

Tanzania does NOT have its own specific sanctions list solely for cryptocurrency.

Its sanctions compliance obligations for crypto (if regulated or implicitly covered by AML/CFT laws) would stem from:

1. International Lists: Implementing the UN Security Council Consolidated List, and potentially adhering to OFAC and EU lists due to extraterritorial reach.
2. Domestic Implementation of International Lists: The Tanzanian FIU or other competent authorities may maintain a domestic list of designated persons, but this would primarily be a transposition of UN Security Council designations rather than a unique Tanzanian list targeting crypto. These domestic lists would apply to all financial transactions, not just crypto.

Conclusion

Any entity involved in virtual asset services with a connection to Tanzania must implement robust AML/CFT and sanctions compliance programs. This includes comprehensive KYC/CDD, ongoing transaction monitoring, and diligent screening against international sanctions lists (UN, OFAC, EU) to prevent facilitating financial crimes or sanctions evasion, even in the absence of a dedicated crypto regulatory framework. The general AML/CFT laws of Tanzania, particularly the Anti-Money Laundering Act and Prevention of Terrorism Act, would be the primary legal instruments for enforcement.

Disclaimer: This information is for general guidance and informational purposes only, and does not constitute legal advice. The regulatory landscape for cryptocurrencies is rapidly evolving. For specific advice regarding operations in Tanzania, it is essential to consult with qualified legal counsel specializing in Tanzanian law and financial regulations.