The Central Bank of Kenya (CBK) Governor Dr Patrick Njoroge’s rules on large cash transactions have been dealt a blow after National Assembly Speaker Moses Wetang’ula termed them illegal.
Also, on the receiving end for usurping the powers of the National Assembly is the Teachers Service Commission (TSC) guidelines on the delocalisation of teachers.
In his ruling posted on parliamentary website, Speaker Wetang’ula said that the CBK and TSC rules are illegal because they were not approved by the House as required by the Statutory Instruments Act before they came into force.
“Any instrument said to be made pursuant to a power granted by an Act of parliament must be brought before parliament for scrutiny,” Speaker Wetang’ula says as the House plans to publish non-compliant regulations.
Article 94 (5) of the constitution vests parliament with a legislative mandate to the exclusion of any other person or body.
It states that a person or body other than parliament may only issue an instrument having the force of law under the authority conferred by the constitution or by legislation.
The CBK Governor circulars require the financial institutions not to receive money exceeding Sh1 million without the customer providing reasons as to where the money came from.
Equally the financial institutions are barred from authorizing withdrawals above Sh1 million without explanations for their intended use.
To enforce the CBK Governor Circulars, those who want to make large cash withdrawals are required to fill a form issued by their banks explaining where the money is being taken or where it has come from.
Although the CBK’s motive was to check illicit financial flows like money laundering and terrorism financing among others, failure to seek the approval of the MPs renders their implementation illegal.
Towards the end of the last session, Ainabkoi MP Samuel Chepkonga sought guidance from Speaker Wetang’ula on the failure by regulation-making bodies to seek the approval of the House before implementing the regulations.
Mr Chepkonga chairs the House Committee on Delegated Legislation that considers and recommends to the House whether to approve or annul regulations presented for approval in the House by government bodies.
Mr Chepkonga specifically singled out Dr Njoroge, accusing him of failing to publish the banking regulations on the large cash deposits and withdrawals and having them approved by parliament.
“The committee’s concerns are that there are various instruments that currently have the force of law but were not tabled before the House as required by the Statutory Instruments Act of 2013,” the Ainabkoi MP had petitioned the Speaker.
Currently, the Statutory Instruments Act and the House Standing Orders limit the mandate of the Delegated Legislation Committee to instruments only tabled in the House.
This means that the committee cannot lay its hands on the instruments not tabled in the House but are in operation.
But what happens if a regulation-making body fails to table such an instrument in the House for scrutiny?
Section 11 of the Statutory Instruments Act automatically nullifies instruments not laid before parliament for scrutiny.
According to the Speaker, although the provision may be clear to “us as a House, it has to be put into context.”
“The regulation-making bodies and other functionaries of the executive publish various instruments they require members of the public to obey without providing any evidence that they have tabled such instruments for scrutiny,” said Speaker Wetang’ula.
The Speaker says that in the unlikely event that the regulation-making bodies persist in their failure to table instruments “that ought to be tabled in parliament”, the Delegated Legislation Committee “is at liberty to report that fact to the House.”
“To insulate the public from blind obedience of instruments that are seemingly immunized from parliamentary scrutiny, the House may resolve to direct the publication of a notice highlighting the non-compliant instruments and their fate,” the Speaker says.
The Speaker’s ruling also notes that the gap between the exercise of delegated law-making authority and the scrutiny of subsidiary legislation has led to the general public “blindly” abiding by the instruments “merely” on the basis that they have been published.
“The public is not able to access information on when and whether instruments have had the force of law,” the Speaker says.
CBK’s Banking Circular Number 1 of 2016 (Additional Guidelines on Large Cash Transactions), reminded the local banks and other financial institutions of the requirements in the Proceeds of Crime and Anti-Money Laundering Act (POCAMLA) and its regulations on the legitimacy of funds and keeping track of large cash transactions.
The CBK circular was informed by findings from target inspections that revealed that corruption proceeds had been transacted through large cash transactions as the country recorded huge financial scandals.
In 2014, then House Speaker Justin Muturi took notice of the practice adopted by regulation-making bodies of neglecting or failing to transmit regulations to the House for consideration and approval.
The immediate former Speaker ruled that every Cabinet Secretary responsible for a regulation-making authority shall within seven sitting days after the publication of the statutory instruments ensure that a copy of it is transmitted to the House complete with an explanatory memorandum.
The regulations governing large cash transactions are in line with the Banking Act that became effective on October 1, 2018.
Section 33 of the Banking Act requires CBK to develop regulations prescribing conditions on deposits and withdrawals within thirty days from the date of coming into force of Section 65 of the Finance Act on October 31, 2018.
“No other persons other than CBK can issue regulations on deposits and withdrawals. All existing guidelines or regulations on deposits and withdrawals by customers would become null and void within 14 days of the coming into force of the Banking regulations,” the Banking Act states.
The law further compels the CBK boss to comply with the Statutory Instruments Act of 2013 when preparing the regulations.
However, CBK says that complying with the law is akin to annulling the United Nations Security Council Resolutions on Anti-Money Laundering and Counter Terrorism Financing (AML and CFT) of which Kenya is a signatory and therefore duty bound.
The AML and CFT standards are set by the Financial Action Task Force (FATF) to which Kenya signed in 1999.
Section 44 (3) of POCAMLA provides for the reporting of all cash transactions above a specified threshold to the Kenya’s Financial Reporting Centre (FRC).
The Proceeds of Crime and Anti-Money Laundering regulations require reporting of all cash transactions of $10,000 and above to the FRC whether they are suspicious or not.
Credit: Source link