Central Bank of Kenya (CBK) Governor Patrick Njoroge has pushed back at MPs’ plans to relax anti-money laundering laws, warning that the proposed amendments would frustrate the war on corruption and cut off Kenya’s banking sector from the global financial system.
The CBK boss Tuesday told MPs that Kenya risked being seen as tolerant to money laundering and financing of terrorism if it implemented changes proposed by the legislators six months ago.
“The adverse effect of the Amendment on the banking sector, would be immediate termination of relationships by foreign correspondent banks and closure of accounts of Kenyan banks (de-risking),” he told the National Assembly’s Finance Committee Tuesday.
This means that the regional linkages of Kenyan banks with international counterparts would be severed.
He added that “Kenya’s banking sector will be blacklisted internationally and the country will most likely be blacklisted by the FATF”.
Financial Action Task Force (FATF) is an inter-governmental body established to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and proliferation of weapons of mass destruction.
The CBK boss was required to publish regulations governing the banking industry by October 31 2018 -- 30 days after coming into force of the Finance Act.
The amendments touching on cash transactions meant that all the existing guidelines on deposits and withdrawals by customers would become null and void within 14 days of the coming into force of the regulations.
“It is true you can give us a law to implement, but if it is impossible to implement we cannot implement it. This is an unimplementable law and no matter how hard we try to implement it we will fall on our face,” he told the MPs Tuesday.
Dr Njoroge said publishing the regulations had proven difficult because of the stipulated timelines and the fact that they would conflict with existing anti-money laundering rules.
“The existing regulations would just not be brought together, reviewed by the public, reviewed by the Attorney General, then brought to Parliament, then made effective within 30 days. In fact theoretically it takes a minimum of 90 days to do all these,” he said.
The amendments, he said, attempt to annul the United Nations Security Council Resolutions that relate to Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT).
War on corruption
Kenya is a signatory of the UN Treaty and is therefore bound by these resolutions. Global AML/CFT rules are set by FATF.
“The Amendments would also mean the war against corruption will be lost resoundingly. Kenya will become a safe haven for money laundering, terrorist financing, and other illicit flows,” said Dr Njoroge.
The governor said he consulted the Attorney-General on October 26 2018 to get a legal interpretation of the matter, but is yet to get a response.
On November 30, civil rights groups sued the National Assembly and the AG on the proposed Amendments through the High Court.
CBK was enjoined in the suit. The case has already begun and is scheduled for hearing on March 29.