Kenya's push to relax checks on large cash deals gets IMF attention 


IMF Mission Chief to Kenya Haimanot Teferra. PHOTO | POOL

The International Monetary Fund (IMF) will engage the Kenyan government to ensure a proposal to relax the checks on large cash transactions by financial institutions does not increase the risk of money laundering.

This is after the Cabinet approved a proposal to increase Kenya’s cash disclosure threshold by 50 percent from the current $10,000 (Sh1.4 million) to $15,000 (Sh2.1 million). 

Anti-money laundering and the combating of terrorism financing are key pillars of Kenya’s ongoing programme with the IMF.

“We have just received the Bill and are looking at it and we will be engaging actually through our legal department because this is one of the very important topics. We will look at the Bill and have a conversation to make sure that Kenya will be able to avoid greylisting. We believe that some of the things that were in the evaluation have been included but we are still reviewing it,” IMF Mission Chief to Kenya Haimanot Teferra told the Business Daily

The Anti-Money Laundering and Combating of Terrorism Financing Laws (Amendment) Bill, 2023, was approved by a Cabinet meeting chaired by President William Ruto on July 18. 

The global money laundering and terrorism financing watchdog, the Financial Action Task Force (FATF), identifies jurisdictions with weak measures to combat money laundering and terrorist financing in two documents, the black list and the grey list, that are issued three times a year.

The blacklist has countries at high risk of money laundering and terrorism financing. As of the latest assessment in June 2023, it had North Korea, Iran and Myanmar.

The grey list has 26 countries, including Tanzania, Uganda, Nigeria and South Africa.

The Kenya Kwanza government maintains the Anti-Money Laundering and Combating of Terrorism Financing Laws (Amendment) Bill, 2023 will tighten the noose on illicit cash and terrorism financing in Kenya.

The Financial Reporting Centre, Kenya’s watchdog on illicit cash, will be empowered to impose sanctions for violations of the proceeds of crime.

“Besides raising the cash transaction reporting threshold from $10,000 to $15,000, the Bill provides for the requirement for companies to keep a register of beneficial owners. The Bill further aligns the reporting requirement by making reporting institutions report suspicious transactions promptly upon forming suspicion,” the Cabinet stated in its July 18 memo.

In its latest review of the programme, the IMF called upon the government to address gaps in the legal framework and prioritise measures to improve effectiveness through enhancing anti-money laundering risk-based supervision.

“The end-June 2023 structural benchmark on draft amendments to address legal and regulatory gaps in the Anti-Money Laundering/Combating the Financing of Terrorism framework is on-track. The authorities plan to submit to Parliament by end-June draft legal amendments to address gaps in the AML/CFT framework to further support anticorruption efforts,” the IMF said in its latest report.

Ms Teferra said that the fund will engage with the government to ensure that the proposed change of threshold in large transactions does not hurt Kenya’s standing as far as anti-money laundering is concerned.

“Hopefully the Bill addresses what is needed and we will engage with the authorities to make sure they can avoid being grey-listed in February 2024,” Ms Teferra said.

The FATF conducted an on-site visit in Kenya between January 31 to February 11, 2022.

The assessment found that Kenya had made improvements to its anti-money laundering frameworks such as the establishment of the Asset Recovery Agency (ARA), enhancing the human and technical resources of the Financial Reporting Centre (FRC), conducting a national ML/TF risk assessment (NRA) and introduction of beneficial ownership information requirements to comply with international standards and address deficiencies identified in the 2011 evaluation.

But it found outstanding strategic gaps in Kenya’s technical compliance and effectiveness which need to be addressed.

The report found key weaknesses in Kenya’s understanding of risk, related but not limited to different types of money laundering, cash and cross-border risks, types of legal persons, and politically exposed persons.

“Additionally, there is insufficient evidence to conclude that understandings of risk adequately inform Kenya’s national AML/CFT strategy and whether findings of the national risk assessment have been effectively cascaded to Financial institutions,” the report said.

Kenya did not also demonstrate that the national AML/CFT strategy adequately addressed the identified risks.

The report added that Kenya did not have a demonstrable strategic policy to prioritise the investigation or prosecution of money laundering.

“The authorities prioritise predicate offences such as corruption over ML and do not carry out to a wider extent parallel investigations alongside predicate offence investigations, resulting in few ML investigations and no successful prosecutions,” said the report.

The review also found that terrorist financing was not integrated as a component of the wide-ranging efforts to tackle the severe and fatal terrorist risk suffered by Kenya.

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