The Central Bank of Kenya (CBK) has identified 800 accounts of individuals it says may attempt to clean illicit money in old Ksh1000 denominations.
The CBK has already written to banks reminding them to lookout for individuals who may circumvent rules against money laundering and terrorism due to the rush expected in the coming days.
“Commercial banks are therefore reminded of the AML/CFT obligations under the Central Bank of Kenya Prudential Guidelines and the Proceeds of Crime and Anti-Money Laundering Act, 2009,” said CBK Director of Bank Supervision Gerald Nyaoma in a circular to lenders.
Time is running out
With just 10 days remaining to the deadline for exchanging old denominations Ksh1000 banknotes, banks are on high alert for suspicious activities especially money laundering.
CBK had said the exercise is intended to mop up Ksh217 bilion a 1000 notes that are in circulation. As of early september, the banking regulator that more than KSh100 billion of the old currency is still in private hands.
There is suspicion that corrupt individuals who have been hoarding the notes, mostly in bankers in their houses and business premises, will take advantage of the rush to bank their ill-got money.
Focus is on
Transactions that require huge amounts of money like buying vehicles and investment in shares is among those targeted for scrutiny. Currently, the shilling is weighed down by excess liquidity in the market, which is causing it to weaken against the dollar. Yesterday, the shilling closed on a low of Sh103.9 against the dollar even as the CBK stepped up efforts to mop up extra shillings by offering banks repurchase agreements in exchange for extra cash.
The banking lobby group Kenya Bankers Association (KBA) supports CBK’s move; asking to continously scrutinise every person who comes to exchange notes or makes unusually high deposits
At this point in time the level of vigilance is extremely high. Banks have been reminded to report any suspicious financial activity using know-your-customer rules,” said Mr Habil Olaka, the Kenya Bankers Association (KBA) chief executive.
Over the last three months, at least 800 accounts have over the last three months been placed under investigation after their owners exchanged unusually high amounts of money causing suspicion on the source of the money.
The cases are being handled by the Anti-Banking Fraud Unit domiciled at the Directorate of Criminal Investigations (DCI) and the Financial Reporting Centre (FRC). These accounts are just a tip of the iceberg on the extent of money laundering exposed by the demonetisation of the Ksh1,000 note.
Some individuals under investigation are said to have exchanged more than Sh5 million in cash.
On Wednesday, the Director of Public Prosecutions (DPP) Noordin Haji directed EACC, The National Police Service and other law enforcement agencies to preserve the old Ksh1,000 notes being held as exhibits in cases in order to enable the courts to make appropriate orders that will facilitate demonetisation.
“This move aims to preserve the monetary and evidential value of the exhibits in court. You should file a report on the said cases before September 30,” the DPP said in a memo.
CBK Head of Communications Wallace Kantai on Thursday said that the level of success of demonetisation will only be known after the September 30 deadline.
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