Central Bank of Kenya confessed that revelation that crooks had moved Sh320 billion dirty money in the last eight years informed its take to replace old Sh1,000 bank notes.
The CBK said in court papers that Kenya loses an average Sh40 billion in illicit money flow, meaning that from 2011 criminals have perpetuated Sh320 billion money fraud.
“Among the main culprit has been use of old Sh1,000 note. This has led to the adoption of the policy to demonetize the Sh1,000 and banknotes,” Kennedy Kaunda, a director at CBK said in court papers.
Kaunda explained that studies conducted in the years, revealed that Kenya’s highest denomination is the main culprit which facilitates corruption, tax evasion and money laundering.
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CBK filed its explanation in a court case challenging a directive requiring persons who deposit Sh1 million of the old bank notes in exchange of the new denomination explain how they acquired the same.
Mr Kaunda was replying to a case filed by Georgina Khaemba complaining that it was unfair to require those returning Sh1-4 million to explain how they acquired the money, and for those with above Sh5 million to obtain endorsement from CBK.
Ms Khaemba described herself as businesswoman “storing money in a safe at home”.
In the case, Ms Kaemba argued that it was discriminatory to categorise banking clients. She added that the directive by Central Bank Governor Patrick Njoroge meant that anyone who had excess unbanked cash either transacted in dirty or blood money.
“The said policy and guidelines are prejudicial to the petitioner herein and other class of few persons categorized as having lots of old Sh1,000 currency bills amounting in excess of Sh5 million who then require investigations and endorsement before such notes can be exchanged into new generation notes,” argued Ms. Khaemba.
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The guidelines which kicked in last month seem to bite as already two cases have been filed seeking to soften the stand on the old notes and handling huge amounts of money.
The guidelines have not hit Ms Khaemba alone, Anthony Mwongela “a businessman whose trades require hefty amounts of money” has sued Standard Chartered Bank.
Mr Mwongela claims that he trades in stocks, online wallets and cards, cryptocurrency and freelancing.
He sued the lender after he was notified that his accounts would be closed, reason being “statutory hindrances”.
According to Mwongela, he prefers being paid in cash because the trade he is engaged in is allegedly unstable.
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“At the time of opening the accounts, I revealed that the accounts would be receiving hefty amounts of money and that I would be willing to comply with the statutory requirements and I was willing to reveal the source of funds should the information be needed,” claimed Mwongela.
He said that on July 11, 2019, Standard Chartered informed him the accounts would be closed.
“The information was relayed to me despite my willingness to supply the respondent needed to support the use of my account. I have been accused of no wrongdoing,” he said asking the court to block the bank from closing his accounts.
“No entity has raised claim against me for discontent use of the accounts or its large deposits.”
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Central Bank of KenyaCBKSh1000 bank notesNew bank notes
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