Financial Crime World

Kenyatta Securities Exchange Implements New Money Laundering Risk Rating System

Curbing Money Laundering and Terrorist Financing in the Capital Markets

Nairobi, Kenya - In a bid to combat money laundering and terrorist financing activities in the capital markets, the Kenyatta Securities Exchange (KSE) has introduced a new money laundering risk rating system. The system assigns a risk rating to each customer based on factors outlined in the Guidelines for Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT).

Identifying High-Risk Customers

According to the guidelines, customers who present high risks of money laundering include:

  • Those from jurisdictions identified by the Financial Action Task Force (FATF) as having high strategic AML deficiencies or strong links to terrorist activities.
  • Individuals whose origin of wealth cannot be easily verified and politically exposed persons.

Low-Risk Customers

On the other hand, customers with a regular source of income from a known legitimate source, those with a positive reputation, and public entities are deemed to carry lower money laundering risks.

Conducting Due Diligence

To determine a customer’s risk rating, market intermediaries must conduct thorough due diligence and scrutiny of their identity and investment objectives. This includes:

  • Obtaining satisfactory evidence of the customer’s identity and legal existence.
  • Verifying their address through exchange of correspondence or other appropriate methods.

Compliance Requirements

To ensure compliance, market intermediaries are required to:

  • Maintain records of customers, business relationships, and transactions for a minimum period of seven years from the date of completion.
  • Report suspicious transactions to the Financial Reporting Centre established under Section 21 of the Proceeds of Crime and Anti-Money Laundering Act, 2009 within seven days of the transaction.

Additional Requirements

Market intermediaries are also required to:

  • Develop a group policy on AML/CFT, which shall apply to all its branches and subsidiaries outside Kenya.
  • Conduct regular training programs to ensure that employees understand and implement the requirements under the Proceeds of Crime and Anti-Money Laundering Act.
  • Monitor their business relationships with customers on an ongoing basis and conduct regular checks on names of new, existing, and potential customers against the database of listed persons maintained by the CMA.

Implementation and Compliance

The implementation of these guidelines is expected to significantly reduce money laundering and terrorist financing activities in the Kenyan capital markets. The KSE has vowed to work closely with regulatory bodies to ensure compliance and prevent financial crimes.

“We are committed to maintaining a robust AML/CFT framework that protects our customers, employees, and the integrity of the market,” said a spokesperson for the KSE. “These guidelines are an important step towards achieving this goal, and we will continue to work tirelessly to implement them effectively.”