As suspects in the Sh791 million theft at the National Youth Service (NYS) were being rounded up and prosecuted, executives of five local banks sweated in their offices.
The Central Bank of Kenya (CBK) and the Director of Public Prosecutions (DPP) were training their guns on the CEOs for violating anti-money laundering laws by failing to flag the suspicious NYS transactions.
Standard Chartered, Equity, KCB, Cooperative and Diamond Trust Bank (DTB) later paid a total of Sh392 million in fines to CBK and another Sh385 million when they signed a Deferred Prosecution Agreement (DPA) with the DPP and the Directorate of Criminal Investigations (DCI).
All these happened because of changes in the international and domestic financial systems that came after the September 11, 2001 bombing of the World Trade Centre in New York.
Though the carnage happened thousands of kilometres from Kenya, the US government framed it as an attack on the heart and soul of the civilised world and every country was expected to join the war.
The days of customers transacting huge sums without declaring the source became a thing of the past.
Kenya and many other countries moved with speed to financially starve terrorists by enacting and passing anti-laundering laws.
“The government has strengthened risk-based supervision in the financial industry to promote competition and safety,” Treasury Cabinet Secretary Ukur Yatani told the Sunday Nation.
“This has enabled regulators to address emerging risks, extend the credit reporting framework to include providers from outside the financial sector and strengthen the Financial Reporting Centre (FRC), which plays a critical role in fighting money laundering and terrorism financing.”
Between 2009 and 2018, Kenya has enacted the Proceeds of Crime and Anti-Money Laundering Act, 2009, which established the Anti-Money Laundering Advisory Board, the FRC and the Assets Recovery Agency; the Prevention of Terrorism Act, 2012, the Proceeds of Crime and Anti-Money Laundering Regulations, 2013 and the Prevention of Terrorism (Implementing the United Nations Resolution on Suppression of Terrorism) Regulations, 2013.
The government has also issued the Guidance Note on Cyber Security, 2017, which has been strengthened by the 2018 Cyber Security Act.
Mr Yatani said the laws are meant to deny terrorists as well as their sympathisers the financial resources needed to facilitate or support their acts, as well as bring discipline in the finance industry.
Kenya Bankers Association (KBA) chief executive, Habil Olaka, says September 11, 2001 changed financial operations globally.
“Financial systems have been revolutionised since the 9/11 attacks,” he said.
Unlike before when the know-your-customer compliance suggested best practice for banks and mobile money providers, it is now a statutory requirement.
“Kenya has put up systems to ensure players comply. The laws and policies put in place fortify our system against money laundering and the financing of terrorism,” Mr Olaka said.
The CBK has also tightened requirements for large cash transactions.
Anyone depositing or withdrawing Sh1 million and above is now required to disclose the source of the money, destination, explain why the transaction cannot be done electronically and give the identity of the intended beneficiaries.
“Where a customer is unable to provide or the facts given fail to support the rationale behind the transaction, the institution should immediately file a report with the Financial Reporting Centre,” CBK Banking Circular One of 2016 says.
Other than legislation and tight controls, Mr Yatani said the government has conducted a national money laundering and terrorism financing risks assessment.
“The outcomes of this exercise have been used to strengthen risk-based anti-money laundering and countering financing of terrorism,” he said.
Kenya is a member of the Financial Action Task Force as well as the Eastern and Southern Africa Anti-Money Laundering Group. BY DAILY NATION
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