CBK demands report on cash transactions exceeding Sh850,000 (USD10,000)

Kenyan banks will be required to report to the regulator lumpsum cash transactions exceeding Sh850,000 ($10,000) in new anti-money laundering rules aimed at curbing the cleaning of illicitly acquired wealth.

The notification to the Central Bank of Kenya will entail a written statement by the customer on the source of the deposits.

“All reporting institutions shall file reports with the Centre on all cash transactions exceeding US$ 10,000 or its equivalent in any other currency carried out by it, whether or not the transaction appears to be suspicious,” says CBK in the new regulations dated October 1.

The new rules make it a crime for a bank not to report suspicious transactions conducted by any of its clients. To ensure this is done all banks are to create the position of a money laundering reporting officer at management level.

“Every reporting institution shall have a money laundering reporting officer. The officer shall be of management level and shall have relevant and necessary competence, authority and independence,” adds the regulator.

The rules have been published by the recently established watchdog, Financial Reporting Centre, and are open to public debate.

However, bankers argued that they don’t have to create a new position as they have the position of compliance managers who hold responsibility set for the money laundering officer.

“The law describes certain functions so we have compliance officers who do that by ensuring that we adhere to the prudential guidelines and other policy and regulatory requirements,” said Munir Ahmed, the managing director of National Bank of Kenya (NBK).

Use of electronic transfer services instead of cash transactions helps create a trail that can be followed in case of investigations.

Kenya has been viewed as prone to money laundering especially due to its proximity to Somalia which has had no government for more than two decades.

Vibrancy in the real estate sector and rapid rise in property prices in major towns have partly been attributed to illicit cashflows from ransom payments by Somali pirates.

US diplomatic cables made public by WikiLeaks last year alleged that several Kenyan firms and businessmen were engaged in money laundering and tax evasion.

Account holders transacting in large sums will be required to write a statement detailing how they acquire such monies.

A bank that becomes aware of irregular transactions in a customer’s account should not alert the individual but is expected to tip off the Reporting Centre.

The centre has the right to share the information with a tax agency, fraud investigation units, or any other law enforcement authority within or outside Kenya.

Central Bank advises financial institutions to verify customer database against the UN and Security Council list of persons suspected of engaging in or financing terror.

Banks are not to open any anonymous or fictitious accounts but are to ensure they rely on national identity card, passport, birth certificate or driving license.

Risk assessment
Financial institutions are also to conduct money laundering risk assessment prior to introduction of a new product, business practice or technology for both new and existing products.

The FRC was established in April this year under the Proceeds of Crimes and Anti-money Laundering Act. The Act provides that the financial reporting centre will be headed by a director approved by Parliament for a four-year term renewable once. The deputy has a three-year term.

Parliament is yet to approve anyone for the position which is temporarily headed by Jackson Kitili, a former director at Central Bank and current MD of CfC Stanbic Group.

“Our immediate concern was to get it up and running, if we were to go that route (of parliamentary appointment) it may never have started,” said John Wanyela, chairman of the centre.

Business Daily



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