CBK issues rules to curb mobile money laundering

An M-Pesa agent serves a customer. CBK has proposed tighter monitoring of mobile cash transactions. FILE
An M-Pesa agent serves a customer. CBK has proposed tighter monitoring of mobile cash transactions. FILE 

Mobile phone-based money transfers that exceed Sh100,000 in one day could be subjected to investigations if proposed Central Bank of Kenya (CBK) regulations are passed into law.

Weekly mobile phone-based transactions that exceed Sh300,000 will also be investigated, according to the new CBK rules intended to curb money laundering.

The regulations could slow down money transfer services and reduce commission earnings for nearly 40,000 small entrepreneurs who operate mobile cash transfer outlets and cut revenues for telecoms — which Monday declined to comment on the proposed rules.

“The mobile payment service provider or its agents are supposed to set transaction or payment account limits,” said one of the proposed CBK guidelines.

“The higher the value and frequency of transactions, and the higher the payment account limit, the greater the risk, particularly where customers are permitted to hold multiple payment accounts.”

The Central Bank says the regulations are meant to “reduce the risk of mobile payment products being used for money laundering or terrorist financing”.

The service providers are themselves also supposed to set some limits on the basis of the size and frequency of transactions.

The rules come two years after several studies including one by audit and financial advisory firm Deloitte East Africa showed that electronic payment systems were vulnerable to fraud or misuse by criminals.

The final regulations will be published after taking into account comments from industry stakeholders, after which commencement date of the new rules will be set.

“We are currently in the process of making our written submissions on the issues you have raised and as such it will be inappropriate for us to comment on the same publicly, while consultations with the Central Bank and other policy makers are still in progress,” said Safaricom corporate affairs director Nzioka Waita.

The mobile money transfer operators will also come under strict rules on reporting their daily operations.

“A mobile payment service provider shall submit a monthly report to the Central Bank of Kenya in such form and at such times as the Central Bank may require,” says the guideline.

Besides the monthly report, the service operator may be required to provide such information relating to a mobile payment system in a form and at times the Central Bank directs.

Some of the measures that are in the regulations are already being practised by the existing money transfer service providers.

The rules say that a service provider must “take reasonable measures to satisfy itself as to the true identity of any applicant seeking to … carry out a transaction … with it, by requiring … the true identity of the applicant, such as a birth certificate, passport, national identity card, a drivers’ licence or other official means of identification as may be set forth in other regulation.”

The rules state that “in deciding whether a person committed an offence under this section the court must consider whether he/she followed any relevant guidance at the time concerned issued by a supervisory authority or any other appropriate body, approved by the Financial Reporting Centre (FRC), and published in a manner it approved as appropriate in its opinion to bring the guidance to the attention of persons likely to be affected by it.”

The FRC was launched in April last year to coordinate matters relating to anti-money laundering policy.

A mobile payment service provider or its agent must tip the regulator about anyone acting in a manner that raises suspicions of money laundering.

The service provider should not disclose any details to the subject of investigation “which is likely to prejudice any investigation which might be conducted following the disclosure.”

The operator also must not falsify, conceal or destroy documents relevant to the suspicious transactions.

“If a...service provider or its agent becomes aware of suspicious activities or transactions which indicate possible money laundering or terrorism financing, the … provider shall ensure that it is reported to the FRC immediately,” says the rules.

Money transfer firms are obligated to have procedures and controls to resolve customer complaints.

“This includes and is not restricted to, recording of sufficient transaction details to create an audit trail and storage of records for a minimum period of seven years from the date of transaction,” say the rules.