CBK Imposes Multi-Million Shilling Penalties for Non-Compliance with Revised AML/CFT Regulations in Kenya
In an effort to strengthen enforcement and prevent money laundering and terrorism financing, the Central Bank of Kenya (CBK) has imposed steep penalties on financial institutions and their employees for non-compliance with the recently amended anti-money laundering regulations.
Consequences of Non-Compliance
Bank executives have received warning circulars regarding the consequences of non-compliance following the October 2023 enactment of the revised Proceeds of Crime and Anti-Money Laundering Act (POCAMLA).
- Legal Entities: Fines of up to Sh20 million for banks
- Individuals: Penalties of up to Sh1 million for individuals
- Microfinance Banks, Money Remittance Providers, Forex Bureaus, and Digital Lenders: Penalties of up to Sh5 million for legal entities and Sh1 million for individuals
- Additional Penalties: Each additional day of violation incurs an additional penalty of Sh100,000 for all institutions
CBK urged financial institutions to maintain full compliance with AML/CFT/CPF legal and regulatory requirements to avoid these penalties.
Personal Liability
“Personal liability may be applied in appropriate cases where a director, officer, employee or agent has failed to comply with AML/CFT/CPF laws and guidelines, rules, directions and instructions issued by CBK,” the circulars stated.
Reasons for Regulatory Changes
These regulatory changes follow a mutual assessment report by the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) that identified several strategic deficiencies in Kenya’s fight against dirty cash, as well as a recommendation from the International Monetary Fund (IMF).
IMF’s Country Report
The IMF’s country report, released last week, reported progress in Kenya’s crackdown on illicit financial flows following the passage of the enhanced laws. Tightening procedures around money laundering serve as a crucial aspect in Kenya’s IMF-backed program.
Separation of Functions and New Regulations
The changes have seen the CBK separate its prudential and AML/CFT supervisory functions and establish risk-based inspection plans. Kenya is also introducing new regulations to help the Kenya Business Registration Services (BRS) uncover beneficial ownership information for companies, benefiting reporting institutions and their regulators.
FATF Alignment
“The FATF is a global money laundering and terrorist financing watchdog that sets international standards for preventing illegal activities,” said an unnamed CBK official. “These revised laws bring our legal framework in line with FATF standards.”