Central Bank steps up fight against money laundering

CBK headquarters. It has unveiled a reporting template, which money laundering reporting officers will use. File
CBK headquarters. It has unveiled a reporting template, which money laundering reporting officers will use. File 

The Central Bank of Kenya has asked banks to employ staff dedicated to reporting suspicious transactions.

All financial institutions must employ Money Laundering Reporting Officers (MLRO) whose main brief will be to report suspicious transactions, according to a circular released on Sunday. 

The move is set to increase the cost of compliance with the anti-money laundering law as bankers spend millions of shillings upgrading their software to curb the vice.

It seeks to curb the flow of drugs, terrorism and theft proceeds in Kenya’s financial system. “CBK has, however, observed that a number of STRs (suspicious transaction reports) filled with it are low and some are not in the prescribed format,” said CBK in a circular to chief executives in the banking sector.

This has prompted CBK to issue fresh guidelines on reporting suspicious transactions as Kenya emerges as a leading conduit of money laundering.

Anti-money laundering laws came into force late last year but the implementing agency is yet to begin operations. CBK says banks should furnish it with details that include identifying customers in deals exceeding $10,000 (Sh890,000). It has unveiled a reporting template that the money laundering reporting officers will use on reporting suspect dealings. However, bankers say automating the process of checking for suspicious transactions is a more prudent way of complying with anti-money laundering laws.

Gain traction

“The cost of compliance depends on a bank’s transaction volumes, but installing anti-money laundering software is more efficient,” said Mr Alkarim Jiva, the chief financial officer at Diamond Trust Bank. As anti-money laundering efforts gain traction across the world, more banks are installing anti-money laundering systems in a bid to cut costs of regulatory filings. The software, such as Amlock and SAS, are expensive but bankers view this one-off cost as more efficient in the long term compared to hiring MLROs. The software offer analysis of customer identity, size, history, and pattern of transactions and flags suspicious ones.

Analysts say that compliance with anti-money laundering laws will be critical in maintaining a good reputation in the financial services market, besides warding off expensive fines that will be levied on offenders.

“The focus of the law is not on criminals but on people and institutions that enable money laundering,” Mr Tommy Prins, a forensic expert based in South Africa, said.