Kenyan Parliament stops banks from asking clients sources of cash deposits

Customers will no longer be required to disclose the source, use and beneficiaries before getting clearance from banks to withdraw or deposit at least $10,000 (Sh1.5 million) in cash after Parliament struck out the controversial rules on a technicality.

National Assembly Speaker Moses Wetang’ula declared the rules on large cash transactions, which were introduced by the Central Bank of Kenya (CBK) in 2016, illegal because they were not approved by Parliament.

Moneyed individuals and businesses have for long protested the onerous checks, arguing they have hindered their ability to carry out smooth transactions.

This prompted President William Ruto and his predecessor, Uhuru Kenyatta, to push for the relaxation of the rules amid fears of money laundering and terrorism financing.

Commercial banks started following the rules aggressively in recent years after at least five of them were hit with heavy fines by regulators for being used to transact proceeds of crime in government-related procurement deals.

Kenya passed anti-money laundering legislation in 2009 and enacted several regulations in the following years, including one that requires commercial banks to report all suspicious cash transactions above Sh1.5 million.

Under the additional guidelines, which have been struck out, those depositing at least $10,000 are required to disclose the source of the cash and justify why such a transaction could not be made through electronic means.

Customers have also been required to disclose where the money being withdrawn was going, what the money was going to be spent on and who the direct and indirect beneficiaries are.

The rules have been dealt a blow on a technicality, a development that now puts to test how far autonomous institutions can go in issuing directives via circulars without being seen to usurp the Parliament’s powers of law-making.

“Any instrument said to be made pursuant to a power granted by an Act of Parliament must be brought before Parliament for scrutiny,” said Mr Wetang’ula. Source

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