Editorials

Watch out not to weaken money laundering fight

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Central Bank of Kenya. FILE PHOTO | NMG

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Summary

  • Our view is that the limit should only be raised after reviewing the latest data on money laundering proceeds of crime and how the $10,000 figure was arrived at in the first place.
  • The Treasury will need to have a stronger reason for raising the limits than concerns about many small businesses relying on cash payments, which the President says is at 80 percent of their transactions.

President Uhuru Kenyatta has directed the Treasury to review the limit of bank deposits and withdrawals whose sources should be disclosed to the authorities in tracking the flow of unclean money.

Now at the international standard of $10,000 (about Sh1 million), the President says the intended review will, among other benefits, save small businesses from the “onerous” requirement of revealing the source, the intended use and the beneficiaries of Sh1 million and above.

According to the Proceeds of Crime and Anti-Money Laundering Regulations of 2013, any suspicious deals should be reported to the Financial Reporting Centre, raising the bar for unscrupulous individuals and businesses.

Our view is that the limit should only be raised after reviewing the latest data on money laundering proceeds of crime and how the $10,000 figure was arrived at in the first place.

The Treasury will need to have a stronger reason for raising the limits than concerns about many small businesses relying on cash payments, which the President says is at 80 percent of their transactions.

As a matter of fact, Kenya has been aggressively digitising financial processes, reducing cash deals. Already, the business world is moving towards non-cash transactions, which is in tandem with the latest innovations where payments as low as Sh50 can be done through various money transfer innovations.

More importantly, business owners should not be afraid of revealing the reasons for their transactions and their parties.

Already Kenya is grappling with unmet revenue collection targets partly because investors and traders are under-declaring transactions.

It is, therefore, safe to conclude that the anti-laundering regulations are an important tool for monitoring the compliance needed to boost tax collections.

Raising the limit, as has been suggested by the President, would be contrary to the international practice and hurt the very businesses that the government seeks to give a lift.

Across the world, business associates are increasingly demanding more transparency and ridding the financial systems of dirty money is a key part of the campaign. It would be unacceptable to back-pedal and erode the gains so far made in tracking illicit money.