CBK fails to implement Uhuru cash directive three months on

Commercial banks are yet to comply with a presidential directive requiring a higher limit for customer cash transaction disclosures, citing delays by the Central Bank of Kenya to issue operating guidelines.

The directive issued by President Uhuru Kenyatta last October sought to raise the threshold of suspicious cash transactions commercial banks are required to report under anti-money laundering laws to facilitate cash deals among small businesses.

Mr Kenyatta ordered the immediate raise of the reporting threshold for both deposits and withdrawals above the current Sh1 million, without saying what the new figure will be.

On Tuesday, commercial banks said they were in the dark over the directive as the CBK was yet to give direction over the matter.

“I guess it is because it runs counter to the global Financial Action Task Force (FATF) guidelines on limits for cash transactions which Anti-money laundering and Anti-terrorist Financing (AML/ATF) rules set at $10,000,” said a senior banker who sought anonymity so as not to be seen to discuss the regulator’s quagmire freely.

“CBK is required to issue operating guidelines to banks, but they are at a crossroads how to comply with the presidential directive while still complying with the AML (Anti-money laundering) limits.”

The President had last year noted a higher cash transaction limit “will facilitate easy transactions for MSMEs [micro, small and medium enterprises] and help the economy respond to Covid shocks”.

“Cash remains an important payments channel for medium, small and micro enterprises, representing 80 percent of all their transactions,” Mr Kenyatta said.

The central bank has remained tight-lipped on what is causing the delay and on what the new limits will be, even as insiders say increasing the limits in an election year could open the floodgates for dirty cash to fund the August poll.

CBK Governor Patrick Njoroge said in his last update in December that the review was “being dealt with in the central bank” and that he had to make a good judgment based on several concerns. He indicated that he would communicate to the market at an appropriate time.

Chapter 231 of the Constitution says the CBK “shall not be under the direction or control of any person or authority in the exercise of its powers or the performance of its functions.”

Dr Njoroge had following the presidential directive admitted concerns that some banking officials were harassing businessmen over the Sh1 million cash transaction limit.

Dr Njoroge noted at the time banks should refer to a history of regular cash transactions in flagging suspicious deals so that they don’t end up subjecting customers to questions on the source and use of the cash every time they visit banking halls.

“There’s ‘Know Your Customer’ sort of issue. It’s not that they [banks] should start to know you [customer] every single time you come. No. No. There’s a history,” Dr Njoroge told an online press conference in December.

Kenya passed anti-money laundering legislation in 2009 and enacted several regulations in the following years, including the one that requires commercial banks to report all suspicious cash transactions above Sh1 million.

Business people have complained that the cash transaction limit has hindered their ability to carry out smooth transactions.

Commercial banks started following the rules aggressively in recent years after at least five of them were hit with heavy fines by regulators for being used to transact proceeds of crime in government-related procurement deals.

Other institutions, or their staff, have also been investigated on suspicions of being used to funnel cash used by Somalia-based militants, to carry out attacks against civilians in Kenya.

bnjoroge@ke.nationmedia.com