Why banks have rejected increase of cash deals to Sh2 million
Commercial Banks have rejected a move by the Cabinet to amend the law to increase cash transactions to over Sh2 million.
Commercial Banks have rejected a move by the Cabinet to amend the law to increase cash transactions to over Sh2 million warning the window will increase avenues for money laundering and terrorism financing.
The Kenya Bankers Association (KBA) told Parliament that the increase of international threshold of $10,000 (Sh1.41 million) to $15,000 (Sh2.12 million) puts Kenya on the edge given its geopolitical location in the Horn of Africa.
"Retain the cash limits at $10,000 or equivalent in other currencies as opposed to the $15,000 or equivalent in other currencies," Mr David Nyamato, chairperson of KBA compliance committee and head - governance, regulatory affairs and stakeholder relations at NCBA Bank Kenya, told MPs.
"Due to the increase in the volatility of the exchange rate as well as runaway inflation rates being experienced, the threshold of $10,000 threshold amount should be retained and applied in a risk-based approach."
The Cabinet in December approved a proposal that seeks to raise the threshold for reporting large cash transactions by banks to $15,000 to the Financial Reporting Centre (FRC).
It also approved the draft Anti-Money Laundering and Combating of Terrorism Financing Laws (Amendment) Bill, 2023, which raises the threshold to $15,000 and which is now undergoing public participation.
The law currently requires banks, which receive large transactions of $10,000 from clients to report to the FRC.
Kenya is a signatory to the United Nations Security Council's Anti-Money Laundering and Combating of Terrorism Frameworks and a member of the Financial Action Task Force (FATF) that monitors countries in effort to combat money laundering and terrorism financing.
The National Assembly’s Finance and National Planning Committee is conducting public participation on the Anti-Money Laundering and Combating of Terrorism Financing (Amendment) Bill, 2023.
Mr Nyamato, who was accompanied by the KBA chief finance officer Kennedy Mutisya asked MPs to set clear guidelines to steer the process even as the government moves to increase the bank reporting threshold as it guards against risk of increased money laundering and terrorism financing.
"Kenya being the largest economy in the region and its role as a transit hub for the Eastern Africa region also poses a significant risk relating to illicit commerce," Mr Nyamato, who presented the KBA position on the Bill, said.
"Kenya also serves as a major nexus to the tourist-related activities due to its closeness to Somalia, an Al-Shabaab stronghold. Blanket increase in the threshold, increases the threat for terrorist financing."
