In the past Kenya has been fighting a losing battle with money laundering which has seen proceeds of corruption and others ills move around freely. This has been mostly due to weak supervision by the relevant institutions and complicity of some bank officials. However, this year things appear set to change with the CBK issuing additional guidelines on large cash transactions. This is according to a memo sent to Chief executive officers of commercial banks, microfinance banks and mortgage finance companies by Matu Mugo Assistant Director Bank Supervision
In the memo CBK noted that while most transactions are carried out as legitimate business, large transactions which are characterized by informality and anonymity, make the banking sector vulnerable to money laundering and terrorism financing. CBK also reminded the financial institutions of the requirements of Regulation 31 of the Proceeds of Crime and Anti-Money laundering Regulations 2013 which require institutions to obtain written statements from customers confirming that the nature of their business activities normally and reasonably generates substantial amounts of cash to support large, frequent or unusual cash deposits or withdrawals.
It is evident banks have not been following Regulation 31 given the recent sacking of senior managers at Family bank due NYS scandal. With the competition for deposits heating up in the banking sector most bank officials are willing to look the other way if it means getting access to big deposits. However, with the new sheriff in town we can only hope that the days of banks being used as conduits for illegally acquired wealth are over.
To facilitate adherence to Regulation 31 of the Proceeds of Crime and Anti-money Laundering Regulations. CBK has provided additional prudential guidelines on the information that an institution should obtain from customers. Thus with immediate effect CBK requires institutions to ask for the following additional information when handling large transactions that is cash transactions equivalent to or exceeding $ 10,000 (Kshs 1 million).
Why the large cash deposit or withdrawal is necessary?
Why the cash deposit or withdrawal cannot be made through electronic means?
Where the money will be taken right from the bank premises?
What the money is going to be used for?
Who will be the direct and indirect beneficiaries of the money?
The full identity of the intended beneficiaries of the money
The source of the money which is sought to be deposited or withdrawn over the counter
In a case where a customer is unable to provide the information, the institution should immediately file a suspicious transaction report with the Financial Reporting center. If a customer provides false information, an institution should take appropriate action against such a customer and this could include terminating the relationship between the institution and the customer.