CBK moves to cut off launderers ahead of key talks
The Central Bank of Kenya has put in place measures to fight money-laundering. Photo/FILE
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The regulations, which came into effect on Wednesday, require forex bureaus to report any transactions exceeding Sh840,000 ($10,000) or anyone with transactions totalling an equivalent amount in a day to the newly-established financial reporting centre.
Apart from ascertaining the identities of their customers through officials documents such as passports, forex bureau operators are also required to capture commercial details of their customers under the new rules.
A Central Bank circular to bureau operators said all transactions beyond the set limits must be reported whether or not they are deemed suspicious.
The Central Bank of Kenya has issued new rules targeting money launderers in forex bureaus ahead of a crucial international meeting to blacklist countries with weak controls for illicit money.
The regulations, which came into effect on Wednesday, require forex bureaus to report any transactions exceeding Sh840,000 ($10,000) or anyone with transactions totalling an equivalent amount in a day to the newly-established financial reporting centre.
Apart from ascertaining the identities of their customers through officials documents such as passports, forex bureau operators are also required to capture commercial details of their customers under the new rules.
A Central Bank circular to bureau operators said all transactions beyond the set limits must be reported whether or not they are deemed suspicious.
“The purpose of this circular —which is being issued under the Central Bank of Kenya Act — is to require all forex bureaus with effect from October 10, 2012, to forward all suspicious transaction reports to the financial reporting centre (FRC),” the CBK said in a letter signed by Peter Gatere, the assistant director in the CBK’s supervision department.
The circular was accompanied by a standard form that bureaus must use in reporting the transactions.
The form demands detailed information about the client whose transaction is being reported, making it easier for the regulator to trail them unlike in the past when presentation of identification documents was taken to be sufficient.
“Not only are the huge amounts to be captured but also the underlying commercial purpose. We are also required to be looking at the person and questioning the motive of the transaction,” said Sam Angwenyi, the managing director of Ukay Centre Forex Bureau.
Mr Angwenyi defended the bureaus from claims that they have been used to clean dirty money.
He said the fact the bureaus are not authorised to transfer money outside the country but must deal with banks for such transactions makes it impossible for money launderers to use them for this purpose.
“Commercial banks are also putting up regulations and making regular checks on us to ensure that they are not dealing with shell companies and that the exercise due diligence,” he said.
Most banks are now demanding that bureaus set up internal risk departments, indicate whether they have any dealings with politicians and profiles of their major clients.
Kenya is among the countries that will be under scrutiny when a 34-member group of mainly European and American countries meets beginning Sunday to constitute a new list of nations that should be blacklisted for failing to implement Anti-money Laundering and Criminalising the Financing Terrorism (AML/CFT) legislation.
The 34 members of the Financial Action Task Force (FATF) insist that Kenya has many deficiencies in combating money laundering and anti-terrorism activities and have put East Africa’s largest economy among those to be considered for blacklisting at the meeting.
Financial services experts said such a move would be a huge setback for Kenya’s ambition to become a financial services hub in Eastern Africa.
The CBK’s latest action is, therefore, being seen as aimed at convincing the task force that it is implementing the anti-money laundering legislation and is ready to act against the culprits.
The Central Bank has also established the Financial Reporting Centre and moved to train other stakeholders such as the media on money laundering besides publication of new banking and forex bureau regulations as part of the efforts to avoid blacklisting.
Central Bank governor Njuguna Ndung’u said that Kenya, like other developing economies, remains vulnerable to money laundering and terrorism financing due to a wide range of displacement factors.
He blamed the high volume of cash-based transactions, lack of an adequate legal framework and the existence of alternative remittance avenues for the country’s continued exposure to money launderers.
He had put up a strong case for Kenya at a review meeting in Beirut last month, saying the country has made significant progress in implementing the anti-laundering rules.
Prof Ndung’u argued that Kenya was in the process of implementing a new Constitution and building strong institutions even as it deals with the FATF deficiencies.
“The fourth dimension is that Kenya had to go to war to fight terrorism. This is beyond dealing with financial risks but also touches on national sovereignty,” he said in reference to Kenya’s year-long incursion in Somalia.
The latest official statistics show that the military operation in Somalia is bearing fruit having significantly cut the inflow of unexplained foreign money into Kenya.
