A Sh1.14 billion transaction by a large tea firm triggered the suspension of pan-African lender Ecobank from foreign exchange market, the Nation has established.
Sources said the financier last week submitted a bid following a request for foreign currency by the tea company, but executed the transaction the following day — catching the eye of the Central Bank of Kenya (CBK) due to breaches in trading rules.
According to the banking sector regulator guidelines on forex trade, lenders are required to report transaction details such as amount involved, exchange rate offered, and effect the contract on the same day.
This helps to gauge the impact a deal would have on the liquidity of the transacting lender to protect their reserves and also track any suspicious deals that may be linked to money laundering.
Ecobank yesterday confirmed that it was in talks with the regulator over the matter and would ensure compliance.
Foreign exchange
“The matter raised by CBK pertains to a request for foreign exchange from one of our corporate clients for which we duly submitted a bid. The deal was subsequently executed the following day. We are fully engaged with the Central Bank of Kenya to speedily address all the concerns raised regarding this transaction, as we continue to ensure full compliance and minimal disruption to our business, customers, and all our stakeholders,” the lender said in a statement.
The regulator on Monday ordered Ecobank to stop foreign exchange dealings between March 29 and April 4 for unsafe trading practices.
“Ecobank did not have sufficiently robust risk controls to prevent breaches on its foreign exchange exposure limits, or the inaccurate reporting of its position,” the Central Bank said in a statement without revealing the amount of money involved in the suspect deals by Ecobank.
The regulator ordered Econbank to fix loopholes in its foreign currency trading platform by March 31.
Unsafe trading practices
“The remedial plan should also point to specific measures to address the unsafe trading practices that led to the non-compliance and to enforce adherence to orderly conduct as stipulated in CBK’s guidelines on foreign exchange,” the CBK further said.
Ecobank became the second bank to be suspended from the forex market since 2020. Rival Absa Bank Kenya was on April 9, 2020, ordered by the CBK to stop foreign exchange dealing for a week until April 15, 2020, for failing to observe anti-money-laundering rules on some trades and lost profits from the dealings.
There's no story that cannot be told. We cover the stories that others don't want to be told, we bring you all the news you need. If you have tips, exposes or any story you need to be told bluntly and all queries write to us [email protected] also find us on Telegram
