Economy

Bank accounts next of kin rule made illegal

oolaka

Kenya Bankers Association chief executive Habil Olaka. FILE PHOTO | NMG

Banks have won a reprieve after the High Court declared the section of the law that requires lenders to keep updated information on next of kin of account holders null and void.

Justice James Makau ruled that disputed Section 63 of the Finance Act 2018 and Section 33 A of the Banking Act are invalid because it was not subjected to public participation.

Banks were required to maintain a register containing particulars of the next of kin of all customers operating savings, current and fixed deposit accounts.

The next of kin rule was to ensure easy access to cash upon the death of an account holder and conclusion of administration and succession processes in court.

But lenders through their lobby — Kenya Bankers Association (KBA) —opposed the next of kin regulations, arguing the clause was sneaked in.

“I note that the case before the court concerns the interpretation of the constitution as to whether the introduction of Clause 57A, which became Section 63 of the Finance Act 2018 required public participation,” said Justice Makau.

“I have noted what was introduced was not what was in the Bill at the time it underwent public participation hence introduced a substantive amendment affecting the rights of Kenya Bankers Association, it was therefore mandatory for the National Assembly to have resubmitted the Bill to the public to obtain their views.”

The association had sued the National Assembly and the Attorney-General after Parliament passed the disputed legislation in 2018.

The banks argue that this disputed law would violate the one that protects an individual’s right to privacy while they would still risk paying a fine for failing to do so.

Banks in breach of the next kin regulation faced a fine of Sh1 million for each account in breach.

Banks further argued that the law was discriminative since microfinance institutions, saccos had not been asked to maintain next of kin details.

About Sh5.7 billion had by June last year been transferred from bank accounts to the Unclaimed Financial Assets Authority because their owners could not be traced.