Monday, April 19, 2021

Kenya: Central Bank puts banks on alert over money launders ahead of September 30 D-Day


Central Bank of Kenya wants commercial banks to be extra vigilant to prevent depositing of illicit finances ahead of old Sh1000 end-use on September 30.

In a circular by the CBK’s Banking Supervision Department on Friday, the regulator warned that it would take action against any commercial bank that fails to, neglects or omits to comply with relevant regulations.

“With the September 30 deadline approaching, financial institutions should be even more careful of attempts to circumvent the Anti-Money Laundering requirements, in exchanging or depositing old Sh1,000 notes,’’ CBK said.

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The regulator reminded lenders of their obligation under the Crime and Anti-Money Laundering Act, 2009, saying they should undertake enhance due diligence on customers’ transactions and ensure effective monitoring of all accounts and transactions.

Yesterday, a Sacco with countrywide operations issued a notice to members, stating that the deadline for accepting the old notes will be on September 25.

The fight against money laundering was one of the country’s reasons to phase out old Sh1000 notes, which CBK said was becoming increasingly easier to imitate.

This saw the government announce plans to introduce new generation banknotes on June 1 and announced plans to phase out old generation Sh1, 000 notes by end of this month.

Speaking during the Madaraka Day celebrations, CBK governor Patrick Njoroge said the new Sh1,000 notes will help address the growing concerns of illicit financial flows in the country.

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It also issued tough guidelines on how to exchange the old Sh1,000 currency for new notes.

Those without a bank account are not able to exchange more than Sh1 million of old currency with the new notes without CBK’s approval.

Even with a new bank account, it is reported as a suspicious activity if the holder all of a sudden credits his account with more than Sh1 million, or seeks to exchange it in cash and walk away without proper documentation on proof of source of funds.

The regulator has been tightening the noose on money laundering and terrorism financing, issuing regular guidance notes to banks on the two subjects.

For instance, it issued a guidance note in March last year to clarify the regulatory requirements under Kenya’s Anti-Money Laundering and Combating Financing of Terrorism legislation on the process of undertaking a risk assessment.

It also provided guidance on the factors that banking institutions should consider when assessing their ML/TF risk exposure.

In March, the regulator directed all commercial banks, microfinance institutions, and mortgage finance companies to nominate “an independent and competent external third party” to evaluate the institution’s compliance to anti-money laundering and combating the financing of terrorism programs.

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The appointed parties evaluate the institution’s customer due to diligence measures, its risk assessment for cases of money-laundering and terrorism financing, check the firm’s internal controls against such financial crimes, and their monitoring process.

CBK governor Patrick Njoroge revealed that 100 million pieces of the old Sh1,000 note had been returned by end of last month out of 217 million pieces or Sh217 billion in circulation.

This means the public has only 10 working days to exchange some of the remaining bulk.

With the deadline fast approaching, businesses have started blocking usage of the old Sh1000 notes.


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