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TZ fines Equity and I&M Bank for money laundering

President John Magufuli
President John Magufuli. FILE PHOTO | NMG 

Tanzania’s central bank has fined two Kenyan banks Sh55.78 million for breaking anti-money laundering rules, as regulators in East Africa move to curb the flow of illicit money.

The Bank of Tanzania (BoT) said in a statement yesterday that the fines were imposed for failure to conduct proper customer due diligence and file suspicious transaction reports to the state-backed Financial Intelligence Unit (FIU).

I&M Bank was slapped with the biggest fine of Sh29.58 million followed by Equity Bank (Sh26.2 million).

Also penalised were Tanzania’s United Bank Limited, Habib African Bank and African Banking Corporation, which will pay Sh14.68 million, Sh7.9 million and Sh6.55 million respectively.

“The BoT has imposed monetary penalties to five banks for breach of regulations 17, 22 and 28 of the Anti-Money Laundering Regulations, 2012 for failure to conduct proper customer due diligence and file suspicious transaction reports to Financial Intelligence Unit (FIU),” the regulator said without giving details of the specific breaches.

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“Take disciplinary measures to all staff who were involved in opening of implicated deposit accounts contrary to KYC (Know Your Customer) requirements.”

The staff punishment must happen within three months, the Tanzanian banking regulator ordered, adding that the banks must report the omitted suspicious transactions within the period and ensure they have identities of their customers and details of their financial dealings.

The Kenyan banks were not immediately available for comment. The action by Tanzanian regulator comes barely a year after the Central Bank of Kenya (CBK) fined top commercial banks for failing to report suspicious transactions in connection with the theft of funds at the National Youth Service (NYS).

Penalties totalling Sh392.5 million were imposed on Standard Chartered Kenya, Equity, Diamond Trust, Co-operative Bank and KCB Group.

Tanzania has also tightened regulatory oversight over commercial banks and other financial institutions over the past few years.

The Tanzanian central bank last month gave all banks and financial institutions in the country 90 days to establish primary data centres, saying it will impose hefty fines on those that fail to comply.

Kenyan banks have in the past decade sought a larger share of the Tanzanian market, with their eyes on firms with cross-border operations under the East African common market.

Nine Kenyan banks have operations in Tanzania, including KCB, Diamond Trust Bank, Commercial Bank of Africa, Gurantee Trust Bank, NIC and Cooperative Bank. The banks has 81 branches in Tanzania with Sh111.4 billion deposits.

“In Tanzania, the subsidiaries faced a challenging operating environment as reflected by the losses reported by CBA Tanzania (Sh317 million) and NIC Tanzania (Sh155.74 million),” said the CBK in reference to the 2017 performance of the foreign subsidiaries.

Tanzania’s central bank has revoked the licences of at least nine banks since 2017, saying the move was aimed at safeguarding the stability of the sector.

The closure of the banks came after President John Magufuli ordered the central bank to take action against failing financial institutions.

Also penalised were Tanzania’s United Bank Limited and Habib African Bank, which will pay Sh14.68 million and Sh7.9 million respectively.

“The BoT has imposed monetary penalties to five banks for breach of regulations 17, 22 and 28 of the Anti-Money Laundering Regulations, 2012 for failure to conduct proper customer due diligence and file suspicious transaction reports to Financial Intelligence Unit (FIU),” the regulator said without giving details of the specific breaches.

“Take disciplinary measures to all staff who were involved in opening of implicated deposit accounts contrary to KYC (Know Your Customer) requirements.”

The staff punishment must happen within three months, the Tanzanian banking regulator ordered, adding that the banks must report the omitted suspicious transactions within the period and ensure they have identities of their customers and details of their financial dealings.

The Kenyan banks were not immediately available for comment. The action by Tanzanian regulator comes barely a year after the Central Bank of Kenya (CBK) fined top commercial banks for failing to report suspicious transactions in connection with the theft of funds at the National Youth Service (NYS).

Penalties totalling Sh392.5 million were imposed on Standard Chartered Kenya, Equity, Diamond Trust, Co-operative Bank and KCB Group.

Tanzania has also tightened regulatory oversight over commercial banks and other financial institutions over the past few years.

The Tanzanian central bank last month gave all banks and financial institutions in the country 90 days to establish primary data centres, saying it will impose hefty fines on those that fail to comply.

Kenyan banks have in the past decade sought a larger share of the Tanzanian market, with their eyes on firms with cross-border operations under the East African common market.

Nine Kenyan banks have operations in Tanzania, including KCB, Diamond Trust Bank, Commercial Bank of Africa, Gurantee Trust Bank, NIC and Cooperative Bank. The banks has 81 branches in Tanzania with Sh111.4 billion deposits.

“In Tanzania, the subsidiaries faced a challenging operating environment as reflected by the losses reported by CBA Tanzania (Sh317 million) and NIC Tanzania (Sh155.74 million),” said the CBK in reference to the 2017 performance of the foreign subsidiaries.

Tanzania’s central bank has revoked the licences of at least nine banks since 2017, saying the move was aimed at safeguarding the stability of the sector.

The closure of the banks came after President John Magufuli ordered the central bank to take action against failing financial institutions.

EDITOR'S NOTE: We would like to clarify that African Banking Corporation-Kenya (ABC Bank-Kenya) has no presence in Tanzania or any relation or affiliation to the African Banking Corporation mentioned in this article.

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