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Economy

US embassy delays nod for new banknotes

Central Bank governor Dr Patrick Njoroge
Central Bank governor Dr Patrick Njoroge holding the new banknotes at a press conference on May 3, 2019 in Nairobi. FILE PHOTO | NMG 

The Nairobi US Embassy will delay its acceptance of the new Kenya currency for payment of services like Visa fees, arguing it needs to put in place new procedures to accept the notes

It said payments at the embassy will continue to be based on the old currencies, which Kenya gradually started replacing on June 1. The older versions of smaller denominations will remain in circulation alongside the new ones launched, but after October 1, the older 1,000 shilling note will be invalid.

The embassy did not offer a timeframe for accepting the new currencies and did not disclose the acceptance procedures it is working on.

“The Government of Kenya has introduced new currency with plans for withdrawing all old currency from circulation by October 1, 2019. We are currently developing procedures to accept the new Kenyan shillings,” the embassy said on its Twitter handle yesterday.

“Until these procedures are in place, consular applicants will only be able to pay for services using the previous Kenyan shillings. You may also continue to pay by credit card.”

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Banks will have to reconfigure their ATMs (automated teller machines), acquire new cash counting machines and upgrade their software to accommodate the new currencies introduced to the market on Saturday.

The new notes are smaller and have different features prompting the need for ATM upgrades and new money counting machines found in teller booths to verify cash amounts and capture counterfeits.

The Central Bank of Kenya (CBK) redesigned 1, 5, 10 and 20 shilling coins in December 2018 and has begun releasing the new 50, 100, 200, 500, and 1,000 shilling notes in the second phase of the country’s transition to the new currency.

The introduction of new currencies are meant to tackle illicit financial flows, cash counterfeiting and nab tax cheats.

The CBK early unveiled the rules to guide the replacement of the Sh1,000 notes, which accounts for 83 percent of the Sh540 billion in circulation or Sh217 billion.

The 500 notes account for 5.9 percent, Sh200 (4.2 percent), Sh100 (4.8 per cent) and Sh50 (1.9 per cent).

Given Kenya’s status as the most advanced economy in East Africa, the central bank will co-ordinate the move to scrap the banknote with its counterparts in the region, where the Kenyan currency is widely accepted.

Tanzania and Uganda last week stopped the use of the Kenyan currency in an effort to curb laundering of stolen money back into Kenya.

The Bank of Uganda advised banks to subject all flows to enhanced due diligence.

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