Dirty US Dollars And Why Zimbabwean Banks Are Charging You For Depositing Them

So Standard Chartered Bank have started charging customers for depositing soiled notes i.e dirty USD notes. It’s not little money they are charging too: 10% of the total deposit!

How did we get here?

Zimbabwe has quite the concentration of dirty US dollar notes. We adopted the currency in 2009 without much of an arrangement with the Federal Reserve Bank of the United States, the guys who actually mint the notes. So we obviously just kept on recycling those same notes without anyone who would swap them out for fresh ones.

Then problems

Zimbabweans soon realised that the dirty notes we had gotten used to were not readily accepted outside our borders. My colleagues discovered this reality when they went to Capetown a few months ago.

Clever guys were now dumping dirty notes with the banks, usually by depositing them when loading their pre-funded VISA or MasterCard cards. They would then go and use the cards for their purchases outside the country. It’s not only safer to do so, it solves the dirty notes problem neatly.

Local banks have their own problems

The local banks did not really mind taking the dirty notes because the notes were acceptable in Zimbabwe. They would just receive them from one customer making a deposit and then offload them to the next customer making a withdrawal. Those were the days when the US dollar was flowing smoothly in the country.

When the Bond Note was introduced, the USD started becoming scarce and the few people who were fortunate to get the precious notes at the bank were likely to be travelers and ‘snobbish’ people who did not want dirty notes.

Added to that, the Reserve Bank of Zimbabwe does not accept deposits of dirty notes from the banks. Most banks were now exporting the dirty notes to South Africa and then importing back fresh notes.

This wasn’t free of charge. Some sources said FNB in South Africa used to charge 5% of the value of the money for this service. Local banks would just absorb this cost because they needed USD deposits more than they hated losing 5% or whatever the cost was. Surely it’s better to get 95% of USD than to be stuck with just RTGS balances that were no longer backed by anything.

Things got worse

South African Banks decided to stop dealing with Zimbabwean banks altogether. Reason: United States sanctions!

Some banks are now stuck with dirty notes in their vaults that were deposited by pre-funded card customers who have already spent the money loaded on their cards. They can’t give it to people whose relatives have sent them money from the diaspora because those guys don’t want to be given dirty money. Banks can’t force it on them because their remittances partners like Western Union, World Remit etc would raise hell: they actually give banks fresh notes.

Some banks were even talking of refusing dirty notes deposits altogether.

Is there a new market for dirty USD notes?

Fact that Standard Chartered Bank is now charging 10% of the value if their customers are depositing dirty money suggests that there is a new market where they can offload them.

It’s highly probable that Standard Chartered is just passing on the cost as it is. They want to get your USD but they don’t want to have the value knocked off by 10%, they would rather have you incur that cost. I am just speculating here.