The Central Bank of Kenya (CBK) has ordered Absa Bank Kenya #ticker:ABSA to stop foreign exchange dealing between Thursday and April 15 for failing to observe anti-money-laundering rules on some trades and will lose profits from the dealings.
The bank will lose part of profits made from foreign exchange trading on March 20 after the regulator said the transactions breached “know your customer checks” in the trades.
“In investigating these and other earlier transactions, it is evident that Absa Kenya did not have satisfactory assurance of the underlying commercial transactions supporting these trade as is required,” the CBK said in a statement.
“Absa Kenya is required to... reverse the market positions that were created as a result of the flagged transactions.”
The CBK did not provide the value of money involved. Absa Kenya forex trading income grew 11 percent to Sh3.64 billion last year, accounting for more than a third (34.4 percent) of non-interest income.
Yesterday, Absa Kenya said it cancelled the suspect transaction after CBK raised the alarm.
The bank said the clients the subject of CBK penalties were global financial institutions, which the lender did not disclose.
These were being executed on behalf of highly reputable global financial institutions, which are regulated in line with best international practice,” said Absa Kenya in a statement. “The transactions were executed at prevailing market rates.”
This comes weeks after Central Bank governor Patrick Njoroge partly attributed the Kenyan shilling’s recent weakening partly to some “malicious actors”.
The shilling is hovering close to its record low of Sh106.47 per dollar, mainly due to the strengthening of the dollar and concerns about the impact of the coronavirus on Kenya’s export earnings.
Dr Njoroge accused unnamed traders, or “malicious actors”, of contributing to the weakening through indiscipline.
The CBK said Absa would also be required by April 15 to have put in place stronger measures to make sure all documentation needed for foreign exchange transactions was available and followed the regulations.
It said Absa Bank can settle all transactions it did as of April 8.
“Absa Kenya’s acknowledgment of its obligations as an authorised foreign exchange dealer and its commitment to address the underlying issues is noted,” said the Central Bank of Kenya.