Banks defying dirty cash laws risk fines

The Central Bank of Kenya in Nairobi.

The Central Bank of Kenya in Nairobi. 

Photo credit: File | Nation Media Group

Banks, other financial institutions and their employees face steep financial penalties of up to Sh20 million if they fail to comply with the recently amended anti-money laundering regulations.

Circulars sent to bank executives by the Central Bank of Kenya following the October 2023 enactment of the revised regulations say that the penalty for non-compliant banks stands at Sh20 million for legal entities (banks) and Sh1 million for individuals.

Microfinance banks (MFBs), money remittance providers, forex bureaus and digital lenders on their part face a penalty of Sh5 million for the legal entity and Sh1 million for individuals if they flout the anti-money laundering/combating financing of terrorism (AML/CFT) laws.

For all the regulated institutions, each additional day that the violation continues attracts a penalty of Sh100,000.

The circulars were issued by the CBK to the banks and other institutions last November, but have only recently been published on the regulators' website.

“To avoid these punitive penalties being imposed by CBK, financial institutions are advised to ensure full and continuous compliance with AML/CFT/CPF legal and regulatory requirements,” said CBK in a circular dated November 6, 2023.

“Personal liability may be applied in appropriate cases where a director, officer, employee or agent has failed to comply with AML/CFT/CPF laws and guidelines, rules, directions and instructions issued by CBK.”

The revision of the Proceeds of Crime and Anti-Money Laundering Act of 2009 was done to tighten enforcement and preventative measures to seal the lid on money laundering and the financing of terrorism—bringing the law into line with the standards of the Financial Action Task Force (FATF).

The FATF is a global money laundering and terrorist financing watchdog with States as members and is involved in the setting of international standards to prevent illegal activities.

The decision to review the laws came after a mutual assessment report by the regional anti-money laundering watchdog Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), which identified several strategic deficiencies in Kenya’s framework for the fight against dirty cash.

The ESAAMLG monitors how the region is implementing global measures against dirty cash.

The International Monetary Fund, in its country report released last week, highlighted the progress the country has made in tightening its watch over illicit financial flows after the enactment of the enhanced laws.

Tightening controls over anti-money laundering are a key part of Kenya’s ongoing programme with the International Monetary Fund.

The IMF noted that the CBK has separated its prudential and AML/CFT supervisory functions and developed risk-based inspection plans to guide onsite examinations of regulated entities.

The country is also rolling out new regulations strengthening the ability of the Kenya Business Registration Services (BRS) to unmask the beneficial ownership information of companies, which will help AML/CFT reporting institutions and their regulators.

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