Mobile banking laws should not restrict capital inflow

The trustees also deduct any fees levied by the mobile companies in connection with the transfer services, remit the fees to the mobile company and pay the balance to the order of the mobile company’s subscriber.

Contrary to popular belief, at no time are the funds held by or to the order of the mobile company. The mobile companies simply act as a conduit and technological facilitator for the funds.

As such, it is debatable whether such funds, which are indeed not held by or to the control and direction of the mobile companies can be said to be deposits collected by the mobile companies.

The likely conclusion therefore is that the Banking Act does not apply to them.

It is noteworthy, however, that although the mobile telephony money transfer services appear to be unregulated and although Kenya does not have an exchange control regime in place, there are, however, certain limitations that apply on the transfer of foreign currency and the remittance of funds from outside Kenya into the country.

However, Kenya has not yet enacted any anti-money laundering laws so the banks in Kenya are adopting procedures consistent with CBK guidelines and their own internal requirements.

Under Revised Foreign Currency Transaction Guidelines to Authorised Banks issued by the Central Bank of Kenya (CBK), commercial banks have been assigned a monitoring role by the CBK.

Each commercial bank is required to submit returns to the CBK on a regular basis. Foreign currency is freely repatriable from Kenya provided there is written evidence of an underlying business transaction and the bank undertaking the repatriation is satisfied as to the genuineness of the transaction.

So far as remittance from Kenya to outside Kenya are concerned, for any amount equivalent to $500,000 or more, the CBK has requested that the relevant bank notifies the CBK as to the amount and purpose of the remittance.

This is stated to be for statistical purposes. For any amount below the equivalent of $10,000, commercial banks are not required to obtain any documentary evidence to support the transaction, although in certain cases banks will nonetheless seek an explanation.

Clamping down
It is also noteworthy that section 33H of the Banking Act which provides that except with the permission of the CBK, every payment made in Kenya, to or for the credit of a person outside Kenya or outside Kenya, to or for the credit of a person in Kenya or in Kenya (other than a payment for a current transaction) between a resident and a non-resident shall be effected through an authorised bank.

It is an offence to contravene this provision.

Unlicensed providers of money transfer services, particularly funds from overseas, should be aware that they risk being in contravention of the law.

Conversely, the CBK does not, it seems, appear to be very diligent in clamping down on such “informal” unlicensed money transfer service providers.

There are obvious risks attendant to “unconventional” or “alternative” money transfer.