Comments on dangers of recent amendments to Kenya’s Banking Act

Dr Patrick Njoroge, Governor of the Central Bank of Kenya talks about recent changes in Kenya’s Banking Act.

These changes are likely to reverse many years of hard work to curb black money, money laundering and so on. What is worse is that these changes were enacted without keeping the central bank in loop:

On October 1, 2018, following the coming into force of Section 65 of the Finance Act (2018) the Banking Act was amended to include a new Section 33C. In one stroke, Kenya was on the brink of rolling back key instruments in the fight against corruption, money laundering, and financing of terrorism, bringing to nought the hard-fought gains. The amendment refers directly to cash transactions but has far-reaching implications.

Has CBK acted to implement the Amendment? Yes, CBK first saw the amendment after it had become effective, but embarked on understanding and implementing it. To be clear, CBK had not been made aware or otherwise consulted in formulating the amendments, so we had no lead time.

  • The Amendment requires bringing together a variety of requirements in the Banking Act and other laws on deposits and withdrawals. Requirements set by banks for their customers, their terms and conditions, would also need to be wrapped in (including ATM limits, hours for accessing the bank).
  • POCAMLA also has requirements on cash transactions, and these will conflict with  the Amendment.
  • Similarly by treaty, Kenya is subject to the resolutions of the UN Security Council, including on aspects of cash transactions. The amendment would conflict with that.
  • The Amendment does not ensure the safety and soundness of bank transactions. In addition, it does not allow the needed flexibility even in cases of “clear and present” danger.

Governments continue to undermine central bank autonomy..

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