CBK Cracks Down on Financial Institutions: Strict Compliance with AML/CFT Laws or Face Heavy Penalties

January 25, 2024

After the passage of the Proceeds of Crime and Anti-Money Laundering (Amendment) Act, 2023, the Central Bank of Kenya (CBK) has issued a stern warning to financial institutions regarding strict compliance with new Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) regulations.

CBK Instructions and Deadlines

Effective November 6, 2023, the CBK issued Circular number 13 of 2023, instructing all:

Banks
Foreign exchange bureaus
Money remittance providers
Digital credit providers
Microfinance institutions

to adhere to the new regulations. Failure to do so would result in penalties.

Enhanced Customer Due Diligence

Financial institutions must now widen their customer due diligence checks to include:

Significant shareholders
Beneficial owners of legal persons

The CBK mandates these institutions to conduct thorough investigations to ensure strict adherence to the new regulations.

Verification of Agents and Identity Confirmation

The CBK also demands reporting institutions to verify the identity of any person acting on behalf of another in a transaction and confirm their authorization to do so.

Penalties for Non-Compliance

In cases of non-compliance:

Legal persons in the banking sector could face a fine of up to Kshs. 20,000,000.00
Natural persons could incur a penalty of Ksh. 1,000,000.00
Money remittance providers, digital credit providers, and microfinance banks could face a fine of up to Kshs. 5,000,000.00 for legal entities and up to Ksh. 1,000,000.00 for natural persons

Continuous Non-Compliance

Violations of a continuous nature may result in a Kshs. 100,000.00 penalty per day.

Responsibilities and Accountability

The CBK calls on all stakeholders, including Directors, Officers, Employees, or Agents, to comply with the AML/CFT framework to avoid these fines. Penalties will extend to those responsible for non-compliance.

Proactive Stance against Money Laundering

The CBK, in collaboration with the Law Society of Kenya, is taking a proactive stance against money laundering activities. Financial institutions are urged to monitor transactions made by lawyers on behalf of their clients due to the increased risk of exposure in legal circles. The Law Society of Kenya will be held accountable for any money laundering activities by its members.

For assistance in all fintech-related matters in Kenya, please contact A.O.WANGA ADVOCATES at info@aowangaadvocates.com or +254794600191.