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Global financial rules shaping Kenya’s banking landscape

Tuesday, February 02, 2016 — updated on December 31, 2020 - 6 min read

The Central Bank of Kenya headquarters in Nairobi. The CBK now requires banks to obtain more information on customers depositing or withdrawing more than Sh1 million. PHOTO | FILE

The Central Bank of Kenya’s recent directive requiring banks to obtain additional information on customers depositing or withdrawing more than $10,000 (Sh1,020,000) may have rattled many ordinary Kenyans.

The guideline, among other things, requires banks to obtain from their customers details of why the cash deposit or withdrawal is being made, the intended beneficiary or what they intend to use the money for.

This law was passed in response to the September 11, 2001 US terrorist attacks and compels financial institutions such as banks and insurance companies in the United States to help government agencies detect and prevent money laundering through special reporting of large cash transactions.
The Financial Action Task Force (FATF), a global body that sets standards on fighting money laundering and terrorism financing, stipulates suspicious transaction reporting requirements.
It is worth noting that in the US, a Currency Transaction Report (CTR) is automatically generated once an amount holding over $10,000 is processed.
These reports are not just filed to the Financial Crimes Enforcement Network (FinCEN) but also to the tax authority (Internal Revenue Authority).
FinCEN is equivalent to Kenya’s Financial Reporting Centre (FRC). As such, it should not come as a surprise if the Kenya Revenue Authority (KRA) comes knocking at the door of anyone who has made a transaction that is subject to FRC reporting.
This rule is even stricter in countries like Canada. The authorities require a Large Cash Transaction Report (LCTR) to be filed if two or more amounts of less than $10,000, which total $10,000, are received within 24 hours.
Like other banking regulatory bodies, the CBK is introducing a globally recognised regulatory reporting practice to safeguard the integrity of Kenya’s banking sector.