Banks oppose plan to raise large cash reporting threshold to Sh2.1m

Director General Financial Reporting Centre (FRC) Saitoti Maika before the National Departmental Committee on Finance and National Planning at Parliament Building Nairobi on August 15, 2023, for a briefing on the Anti-Money Laundering and Combating of Terrorism Financing Laws (Amendment) Bill, 2023. PHOTO | DENNIS ONSONGO | NMG

Commercial Banks have opposed a plan by the government to raise the threshold for reporting large cash transactions by 50 percent to $15,000 (Sh2.1 million) on grounds that the decision will open avenues for money laundering and terrorism financing in Kenya. 

President William Ruto’s cabinet has approved amendments to the law that will spare bank customers the trouble of disclosing the source, intended use and beneficiaries when making transactions of $15,000 (Sh2.1 million) and below to the Financial Reporting Centre (FRC).

Read: State moves to relax checks on large cash transactions

Appearing before a parliamentary committee conducting public participation on the amendment, the Kenya Bankers Association (KBA) said increasing the threshold from the current $10,000 (Sh1.41 million) will put Kenya on the edge given its geopolitical location in the Horn of Africa.

“Retain the cash limits at $10,000 or equivalent in other currencies as opposed to the $15,000 or equivalent in other currencies,” David Nyamato, the chairperson of the KBA compliance committee and head of governance, regulatory affairs & stakeholder relations at NCBA Bank Kenya, told MPs.

“Due to the increase in the volatility of the exchange rate as well as runaway inflation rates being experienced, the threshold of $10,000 should be retained and applied in a risk-based approach,” Mr Nyamoto, who presented the KBA position on the Bill, said.

The Cabinet last month approved the draft Anti-Money Laundering and Combating of Terrorism Financing Laws (Amendment) Bill, 2023.

The National Assembly’s Finance and National Planning Committee is conducting public hearings on the Bill.

The law currently requires banks to ask clients to explain the source of funds and its uses and report when making transactions of $10,000 and above and report to the FRC should the bank find it suspicious.

Kenya is a signatory to the United Nations Security Council’s Anti-Money Laundering and Combating of Terrorism Frameworks and a member of the Financial Action Task Force (FATF) that monitors countries in an effort to combat money laundering and terrorism financing.

Mr Nyamato, who was accompanied by the KBA chief finance officer Kennedy Mutisya, asked the MPs to set clear guidelines on the process.

“Kenya being the largest economy in the region and its role as a transit hub for the Eastern Africa region also poses a significant risk relating to illicit commerce,” Mr Nyamato said.

“Kenya also serves as a major nexus to the tourist-related activities due to its closeness to Somalia, an Al-Shabaab stronghold. Blanket increase in the threshold increases the threat for terrorist financing.”

The KBA noted that in 2021, the European Union (EU) stopped the introduction of a large transaction limit of Euros across the member states.

The association told the session chaired by the committee vice-chairperson Benjamin Lang’at that the US Federal law requires institutions to report cash or coin transactions above $10,000 to the Financial Enforcement Network.

In Malaysia, Mr Nyamato said cash transactions from January were reviewed downwards to Malaysian Ringgit from $50,000 to $25,000.

“In China, the current cash reporting threshold is $4,451. In South Africa, the cash reporting threshold was revised to be 50,000 Rand ($2,600),” the KBA said.

Mr Nyamato said Tanzania’s current reporting threshold is $10,000 while Uganda has set its transaction limit above 20 million Ugandan shillings ($5,500).

“Financial reporting systems is a global issue. It applies to all the financial sector and we as a country must conform to the global requirements and standards,” Mr Nyamato told the committee.

Read: Lawyers sign pact with State to report clients’ dirty cash

“We are currently on a volatile exchange rate. We ask you to retain the threshold at $10,000 because the CBK specifications specify we report any transaction above Sh1 million.”

If the proposed law is passed, the FRC will have the power to spell out instances where it may ask for the revocation of a reporting institution’s licence.

In October 2021, then-President Uhuru Kenyatta ordered financial institutions to raise the reporting limit, but the Central Bank of Kenya advised against the suggestion fearing that it would expose Kenya to economic sanctions.

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