Treasury secretary Henry Rotich has set in motion a process that could soon rope in savings and credit co-operative societies (saccos) into mandatory reporting of large transactions as part of the fight against money laundering.
Mr Rotich wants Parliament to pass new legislation that will require Saccos to report all customer cash transactions valued at Sh1 million or more to sector regulator Sasra, closing one of the few avenues remaining to move large amounts of cash without regulatory obligations.
The law already applies to commercial banks, insurance, and forex bureaus.
If passed, the proposed amendment will recognise the Sacco Societies Regulatory Authority (Sasra) as one of the supervisory bodies under the Proceeds of Crime and Anti-Money Laundering Act (PoCAMLA) that will receive reports of suspicious transactions for onward submission to the Financial Reporting Centre (FRC).
“I propose to include Sasra as one of the supervisory bodies under PoCAMLA to give the authority a legal platform to monitor the compliance of deposit-taking saccos in respect to prevention of money laundering and combating the financing of terrorism,” said Mr Rotich when he read his Budget Statement in Parliament.
The anti-money laundering law requires the designated institutions to report all cash transactions exceeding $10,000 (Sh1 million) or its equivalent in any other currency to the FRC.
While tightening the oversight of cash transactions in saccos, the proposed law also has the potential to formalise saccos as financial institutions and in the long run help them attract more deposits and investment.
Sasra chief executive John Mwaka said that under the current rules, reporting of suspicious transactions to the FRC is optional, leaving the industry open to abuse by unscrupulous saccos and depositors looking to avoid scrutiny when moving large amounts of money.
“For you to formally report you need to be recognised by the law and that is what the amendment does… It means all saccos will have to report to Sasra and per requirements of the Act, and Sasra will report the suspicious transactions to FRC,” Mr Mwaka said.
“The amendment brings all saccos on fold, all will have to adhere to the law with regard to reporting on the source and use of deposits.”
More Kenyans have in recent years preferred keeping their money in the saccos, pushing the total asset base of deposit-taking ones to Sh393.49 billion at the end of 2016 from Sh171 billion in 2010.
Mr Rotich’s proposals are therefore being seen as a timely measure that reduces the options available for corrupt individuals to move their loot around as they try to evade capture.
Before the amendment, Sasra stood out as the only major financial services regulator that was exempted from reporting large transactions to the FRC.
Banks, microfinance lenders, forex bureaus and remittance service providers are already subject to this reporting requirement under the oversight of the Central Bank of Kenya (CBK), as are institutions regulated by the Capital Markets Authority, the Insurance Regulatory Authority and the Retirement Benefits Authority.
Other oversight bodies mandated to report large and suspicious transactions are the Institute of Certified Public Accountants of Kenya (ICPAK), the Estate Agents Registration Board, the NGO Coordination Board and the Betting Control and Licensing Board.
Unregulated sectors such as motor vehicle dealerships, real estate, dealers in precious metals and stones also report to the FRC.
Reporting institutions are supposed to indicate in the report to the FRC the personal details of a customer, account details, descriptions of a transaction, amount involved and the currency of transaction.