Why Kenya still needs to tighten its anti-money laundering rules


The High Court has frozen more than Sh63 million belonging to Virtual Financials International Ltd. PHOTO | SHUTTERSTOCK

A recent Cabinet meeting approved the Anti-Money Laundering and Combating of Terrorism Financing Laws (Amendment) Bill 2023 to facilitate an increase of the cash-reporting threshold by 50 percent from $10,000 (Sh1.4 million).

The Bill, expected in Parliament for debate, aims to enhance the efficiency of businesses and individuals by raising the limit for the cash-reporting requirement.

The proposed $15,000 threshold is the maximum limit set by the Financial Action Task Force (FATF).

Kenya has made major strides in anti-money laundering (AML) and combating of terrorism financing (CFT), including the establishment of the Asset Recovery Agency (ARA) and the Financial Reporting Centre (FRC).

Despite the sterling efforts, there are some outstanding issues requiring attention. According to the ESAAMLG Mutual Evaluation Report of September 2022, Kenya did not demonstrate that the national AML/CFT strategy adequately addresses the identified risks.

The country is exposed to money laundering threats from proceeds of crime emanating from within and outside the country through the financial system, legal sector, real estate sector and cross-border trade.

With its geographical location and economic development as a regional hub, the country is also a transit route for drug and illegal wildlife trafficking.

Based on the national risk assessment (NRA) report and the risk profile of the country, Kenya faces heightened terrorism financing risks from neighbouring countries with active terrorist groups.

The country has reported good results in the confiscation of proceeds of crime, access and use of financial intelligence.

However, improvements are required in understanding terrorism risks, risk-based supervision and implementation of preventive measures.

With the proposed enhancement of the cash-reporting limit for bank customers, there is a need for players in the financial sector to make their Know-Your-Customer (KYC) requirements more robust, especially paying close attention to the source of funds for their customers.

The risk could be higher with the increased use of technology in the financial sector and growing online transactions, especially with the arrival of the Covid-19 pandemic.

This has created opportunities for increased fraud and money laundering and terrorism financing proceeds moving into online platforms including the unregulated firms offering online foreign exchange trading services.

To mitigate these risks, Kenyans are encouraged to trade only through the licensed companies in the online foreign exchange trading industry.

The writer is the CEO of Scopes Markets Kenya.

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