Art. 3

Licensing of financial institutions

1.       A local financial institution shall not do business in Somalia or abroad nor shall a foreign financial institution do business in Somalia without a license granted by the Central Bank authorizing the licensee to do such business. The license shall indicate the class of financial institution and the operations the licensee is authorized to do.

2. a)   Any person who, immediately before the coming into operation of this law, was doing banking business in Somalia and who intends to continue to do such business, shall, within ninety days of the said commencement, apply to the Central Bank for a provisional license, furnishing tile information required under Article 4 (I).

b)  The Central Bank shall issue to all persons doing banking business in Somalia upon the coming into operation of this law, provisional licenses for a term of twelve months from the aforesaid date.

c)  Before the expiration of the period prescribed under paragraph (b), any financial institution holding a provisional license and desiring to do banking business in Somalia shall apply for a license under the provisions of Article 4 and shall be granted a final license if it complies with the provisions of this law.

d)  Unless otherwise specified in this law, or in its provisional· license, a financial institution holding such provisional license shall be subject to the provisions of this law.

3.  Any person intending to do banking business after the coming into operation of this law shall, before commencing such business, apply for a license under the provisions of Article 4

Art. 4

License application

1.  In order to obtain a license as a financial institution. a person shall apply in writing to the Central Bank and submit the following:  

a) authenticated copies of the instrument under which it is organized;

b)  a statement of the address of its head office, and the name and address of every member of the board, and of its principal officer;

c)  such financial data as the Central Bank may require;

d)  full particulars of the business it proposes to do;

e)  the location of the principal and other places of business in Somalia where it proposes to do business, and in the case of a mobile agency, the area to be served:

f)   such other information as the Central bank may require:

g)  such reasonable application fee as the Central bank may, with the approval of the Minister, specify.

2.  The application and every document submitted in accordance with sub-Section (1) shall be signed by the members of the board of the applicant, or by any principal legally authorized to do so.

3. a)   In considering an application for a license the Central Bank shall conduct such investigation as may be deemed necessary to ascertain the validity of the documents submitted under sub-Section (1), the financial status and history of the applicant, the character and experience of its management, the adequacy of its capital structure, the convenience and needs of the community it intends to serve, the operations it intends to do, and the earning prospects afforded by the area primarily to be served. To ascertain the character of the applicant and the management, the Central Bank shall apply the provisions of Article 27 (1) and (2).

b)    A financial institution shall not be granted a licence under this Section unless it fulfills the requirements specified, either in Article 14 (1) (a) (i) if it is a bank, or in Article 14 (1) (b) (i) if it a credit institution or a specialized financial institution.
 

4.  Within ninety days after the receipt of an application, or, where further information has been required, after the receipt of such information, the Central Bank shall grant a license or inform the applicant that it has refused to grant a license and the grounds upon which such refusal is based: Provided, that in the event of a certification by the Minister to the Central Bank that granting of the license would not be in the public interest of Somalia no other reason for refusal need be furnished to the applicant.

5.  In granting a license, the Central Bank may impose conditions to be satisfied by the licensee in respect of the matters set forth in sub Section 3 (a). In the case of a foreign financial institution, without limiting the generality of the foregoing, the Central Bank shall require as a condition for the commencement of operations that there be filed with it:

a)  a duly executed instrument in writing appointing the Central Bank its true and lawful agent upon whom all process, in any action of proceeding against it on a cause of action arising out of a transaction with its places of business in Somalia, may be served with the same force and effect as if it were organized in Somalia and has been lawfully served with process therein: and a written certificate of designation, which may be changed from time to time thereafter by the filing of a new certificate of designation, specifying the name and address of the officer, agent, or other person in Somalia:

i)   to whom all process shall be forwarded by the Central Bank

ii) upon whom any process not served upon the Central Bank under paragraph (a) may be served.

Art. 5

Use of the word "bank"

1.  No person other than the licensed, financial institution operating as a bank shall without the consent of the Central Bank, use the word "bank" or any of its derivatives in any language, or any other word indicating the transaction of banking business, in the name, description or title under which such person is doing business in Somalia or make or continue to make any representation to such effect in any bill head, letter paper, notice, advertisement or in any other manner whatsoever for the purpose of doing business in Somalia: Provided, that any financial institution doing banking business one year prior to the date that this law shall come into operation which was then using the word "bank" or any of its derivatives in its name, description or title, may elect to retain such word or derivatives thereafter.

Nothing in sub-Section (1) shall prevent a person from using the word "bank" or any of its derivatives in any language, when it is for the sole purpose of organizing a company to the end of applying for a license under the provisions of this law.

Art. 6

Name of financial institutions

1.  No financial institution shall be granted or continue to hold a license under a name which so closely resembles the name of an existing institution as would be likely, in the opinion of the Central Bank, to mislead the public.

2.  Except with the written consent of the Central Bank, no financial institution shall use, or refer to itself by, a name other than that under which it is licensed.

3.  Any license granted under this law shall be displayed and kept displayed in a conspicuous place in the public part of the head office, other offices and branches, and any other place of business of a financial institution in Somalia.

Art. 7

Place of business

1.  Any license granted shall authorize the licensed financial institution to do business at the place or places designated in the license.

2.  Upon receipt of a license, and six months after having commenced banking business or at an earlier date with the approval of the Central Bank, a financial institution may open new places of business in such locations as it may choose after giving notice of its intention to the Central Bank. A financial institution shall not change the location of, or close, an existing place of business in Somalia expect in accordance with regulations which the Central Bank shall prescribe. 
 

Art. 8

Foreign exchange dealers

The Central Bank shall license dealers in foreign exchange who agree to such reporting requirements, which the Central Bank, from time to time, shall by rules and regulations prescribe after the date that this law shall come into operation.

Art. 9

Ownership of financial institutions

1.  All voting stock issued by a local financial institution shall be in registered form.

2.  Without the approval of the Central Bank, no person may acquire either directly or indirectly any interest in the voting stock of a local financial institution which would confer upon him more than twenty percent of the total voting power.

3.  Without the approval of the Central Bank, no local financial institution shall:

enter into a merger of consolidation;  

transfer the whole or any substantial part of its assets or liabilities in Somalia;

effect a reduction of its paid-up capital;

alter its name as set out in its license;

amend the instrument under which is organized.

Undertake banking operations other than the operations it is authorized to do in its license.

4.  Without the approval of the Central Bank, no foreign financial institution, which is licensed under this law shall:

a)       Transfer the whole or any substantial part of its assets or liabilities in Somalia;

b)       Effect a reduction of its assignment capital in Somalia;

c)       Alter its name as set out in its license:

d)       Undertake banking operations other than the operations it is authorized to do in its license.

 5)  In considering any proposed action under sub-section (3)    and (4) of this Article, the Central  Bank shall be guided by the criteria set forth in Article c (3).

Art. 10

Revocation of license

1)  The Central Bank may revoke any license if the licensee:-

fails to commence operations within a period of 12 months following the granting of the license unless such period has been extended by written advice of the Central Bank; or

b)    fails to comply with the conditions of its license or the measures required by the Central Bank in accordance with Article 23 or;  

c)     is in breach of any of the provisions of this Law which are applicable thereto; or;  

              d)    in the case of a financial institution, ceases to do banking business in Somalia.

2)  Before revoking any license, the Central Bank shall give the financial institution or the foreign exchange dealer, as the case may be, notice of its intention to do so, and shall afford the licensee a reasonable opportunity to show cause why the license should not be revoked.

3)  When a license has been revoked, the Central Bank shall as soon as possible, after the expiration of the time period set out in Article 11 if no appeal has been lodged, or after the decision of the court in the event that a timely appeal has been made, publish notice of the revocation in the Official Bulletin and in a newspaper of general circulation in the area in which is located the main office of the licensee in Somalia and take any other steps necessary to inform the public of such revocation.

Art. 11

Appeal to the Court

Within thirty days of receipt of notice from the Central Bank of the refusal to grant a license under Article 3 or 4 or 8 of its decision to revoke a license under the provisions of Article 10 or its refusal to approve any proposed action under Article 10 or its refusal to approve any proposed action under Article 9 (2), (3) or (4), a financial institution or other applicant under those articles may appeal to the competent court.

Art. 12

Banking Business without license

1)  Whenever the Central Bank has reason to believe that any person is doing banking business or foreign exchange business without a valid license, it may call for and examine the books, accounts and records of such person in order to ascertain whether such is the case. Any person (i) doing banking business or foreign exchange business without a license, or (ii) refusing to make available for examination, such books, accounts and records after having been duly requested to do so by the Central Bank, is guilty or an offense and shall be liable on conviction in a court of law to a fine not exceeding two million Somali shillings.

2)  A person holding funds which he has obtained by doing banking business without being in possession of a license granted under this Law, shall repay such funds in accordance with the Central bank's directions.