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Kenya’s Financial Institutions Face Heightened Compliance Obligations in Fight Against Money Laundering and Terrorism Financing

In recent times, concerns over money laundering and terrorism financing have intensified in Kenya, particularly with the growth of the country’s cryptocurrency market. In response, Central Bank Governor Kamau Thugge has urged for international regulations to address these emerging threats.

Amended Anti-Money Laundering and Combating of Terrorism Financing Laws

The Anti-Money Laundering and Combating of Terrorism Financing Laws (Amendment) Act, 2023, has introduced new compliance obligations for private companies with a paid-up capital below KES 5,000,000. One of the key requirements is the appointment of a local director who is a resident of Kenya.

Compliance Standards

To ensure adherence to the highest safety and compliance standards, Kenyan and foreign businesses operating in Kenya must comply with the Central Bank’s guidelines. The cornerstone of CBK AML-compliance lies in conducting an Anti-Money Launderling (AML) risk assessment.

Conducting an AML Risk Assessment

  • Identify all possible risks associated with money laundering and potential ways to manage these risks
  • Conduct a detailed analysis of available data
  • Determine whether the organization’s AML compliance program provides adequate controls to mitigate identified risks

Reporting Risk Assessment Results

The Central Bank requires banks and financial institutions to share their risk assessment results with:

  • Senior management
  • The board
  • All business units
  • Control functions within the organization
  • Annual reports detailing recent risk assessment results are also mandatory, with updates due by December 31st of each year.

Know Your Customer (KYC) and Know Your Business (KYB) Verification

In addition to AML risk assessments, Kenyan financial institutions must also conduct KYC and KYB verification. KYC verifies an individual’s identity, while KYB verifies a business entity’s identity. The documents needed for KYC/KYB verification may vary depending on the customer type and transaction nature.

Automated KYC Solutions

To simplify the process, automated KYC solutions can be used to meet the Central Bank’s requirements. These solutions combine automated KYC, KYB, and AML checks on a single platform, allowing users to verify identity documents and screen against global and African sanctions, PEP, and adverse media watchlists in a few simple steps.

Adapting to Heightened Compliance Obligations

In light of these heightened compliance obligations, Kenyan financial institutions must be prepared to adapt and implement effective risk management strategies to stay ahead of the game. Failure to comply with AML/KYC regulations can result in severe penalties, including fines and even criminal charges.

Prioritizing Compliance

With the stakes so high, it is imperative that businesses operating in Kenya prioritize compliance and ensure that their AML/KYC procedures are robust and effective.

Learn More About Smile ID Solutions

For more information on how Smile ID solutions can help you meet the Central Bank’s requirements, book a free demo today to learn more.