Banks tighten measures to curb illicit cash

The banking lobby has promised to tighten controls over the Sh1,000 notes, a move that is meant to dent the country’s underground economy.

The Kenya Bankers Association (KBA) says that it will not be easy to return illegally obtained money that has been stashed from circulation especially the Sh1,000 note, which is the highest denomination and the most preferred due to its high value.

KBA chief executive Habil Olaka said Sunday that the move to demonetise the notes was meant to catch citizens who stash money not declared for tax purposes or obtained illegally.

“Controls are in place to ensure that the money does not find its way to the formal financial system easily. The system will be checking whether it is from genuine proceeds or crime, which includes corruption,” he said. He noted that acquiring property such as cars would not evade scrutiny.

“Even if you buy cars, whomever you buy from using cash will still have to identify where the money is coming from, so it is not an easy way out,” he said. Mr Olaka added that he was confident that the new move would be successful, saying that banks have already started putting stringent regulations to strengthen their ability to safeguard customers and itself against financial crimes.

Five banks that were fined Sh392.5 million for handling billions of shillings stolen from the National Youth Service (NYS) have already tightened the noose to reduce the risk of such incidents recurring.

In their annual reports, KCB #ticker:KCB, Co-op Bank #ticker:COOP, DTB #ticker:DTK, Standard Chartered Bank (Kenya) #ticker:SCBK and Equity #ticker:EQTY, which transacted Sh3.57 billion, stated that they had taken steps to bolster their fight against financial crimes.

StanChart, which was fined Sh77.5 million for having handled Sh1.6 billion of the NYS money, stated that they enhanced controls around cash and payments from government and other government-related bodies while KCB, which was fined Sh149.5 million for handling Sh639 million of the NYS cash, stated that they have taken measures to reacquaint their staff on all the regulations and processes to be followed in the event of suspicious transactions.