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MPs want checks on large deals increased to Sh10m – Business Daily

Members of Parliament follow proceedings as National Treasury Cabinet Secretary Ukur Yatani unveiled the Sh3.3 trillion Budget at parliament buildings on April 7, 2022. PHOTO | JEFF ANGOTE | NMG
Members of Parliament want the requirement for bank customers to disclose source, intended use and beneficiaries when depositing and withdrawing cash raised above Sh10 million even as the banking regulator called for caution.
They said the current threshold of Sh1 million ($10,000) is hurting businesses and stifling the growth of micro- and small-sized businesses which largely deal in hard currency.
The law currently requires financial institutions to keep records of cash transactions of more than Sh1 million and report suspicious deals to the Financial Reporting Centre (FRC) – the agency tasked with identifying and combating laundering and financing of terrorism.
The disclosures are part of global practice aimed at rinsing financial systems of dirty cash.
Banks also demand additional documentation including source, use, beneficiaries before clearing transactions over a million shillings slowing deals for small businesses.
“We agreed at a meeting chaired by President William Ruto in Naivasha that the limit should be pegged at Sh10 million. This is what we will push for,” Imenti Central MP Moses Nguchine said during the MPs induction in Nairobi.
Mr Nguchine accused the CBK of spearheading anti-business policies.
The MPs said businesses are forced to withdraw money in tranches below the Sh1 million to avoid the lengthy processes which hurt small businesses.
Central Bank of Kenya said the Sh1 million reporting limits are set in law, but bankers need not harass customers where they have adequate client information and transaction history.
CBK Governor, Dr Patrick Njoroge, told MPs the limits were introduced under regulation 31 of the Proceeds of Crime and Anti-Money Laundering Regulations 2013 to check illicit financial flows.
Dr Njoroge said whereas there is need to improve the system to check money laundering, banks should know their customers and not use the rule to punish the same.
“If you are a petrol dealer and you bank Sh2 million daily, the banks should not have a problem with that. They know you are banking that money daily,” Dr Njoroge told an induction workshop for new MPs.
Dr Njoroge said CBK is working on mechanism to improve reporting of large cash transactions following President Ruto’s concern that the current limit of Sh1 million is hindering business and driving people away from the formal financial system.
The CBK governor said even as the reforms are being undertaken the country should not reverse the gains made in fighting money laundering.
In 2010 Kenya was placed on watchdog’s “grey list” of high-risk countries failing to combat money laundering, drug trafficking, corruption and terrorism.
Kenya was taken off the Financial Action Task Force (FATF) in 2014 list of countries at high risk for money laundering and terrorist financing after the country made considerable steps to safeguard financial systems.
Dr Njoroge said financial institutions will continue with their reporting obligations to the Financial Reporting Centre.
“We need to make it better but at the same time ensure that we do not erode or reverse the gains made in checking illicit financial flows. The requirement is not a punishment. We need people to do good business and not those supported by illicit financial flows,” Dr Njoroge said.
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