Financial Crime World

Central Bank of Kenya Sets Forth Requirements for Anti-Money Laundering Compliance

The Central Bank of Kenya (CBK) has issued guidelines for financial institutions to adhere to in order to prevent money laundering and terrorism financing activities within their operations.

Key Recommendations for AML Compliance

To effectively implement Anti-Money Laundering (AML) compliance, the CBK recommends that financial institutions:

  • Identify Risks: Identify risks related to products, services, clients, geography, etc.
  • Implement a Risk Assessment Framework: Implement a board-approved risk assessment framework
  • Continuously Improve Data Collection and Analysis: Continuously improve data collection and analysis for the assessment
  • Provide Regular Reports: Provide regular reports based on the risk assessment
  • Take Actions to Address Identified Gaps or Deficiencies: Take actions to address identified gaps or deficiencies
  • Define Duties and Responsibilities: Clearly define duties and responsibilities for employees participating in the risk assessment process
  • Share Results with Relevant Parties: Share the results with relevant parties, including forwarding a copy of the risk assessment to the CBK.

Board of Directors’ Key Responsibilities

The Board of Directors has key responsibilities during the risk assessment process, including:

  • Developing a Documented Framework: Developing a documented framework for the risk assessment
  • Reviewing Results: Reviewing the results of the risk assessment process
  • Understanding Money Laundering and Terrorism Financing Risk Profile: Understanding the institution’s money laundering and terrorism financing risk profile
  • Allocating Sufficient Resources: Allocating sufficient resources for the risk assessment process
  • Approving Strategic Decisions: Approving strategic decisions made by management after the assessment.

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

To comply with AML policies, KYC or KYB verification is required. The documents needed may vary depending on the customer type and transaction nature.

Individual Customers

  • Proof of Identity: National Identification Card (ID), Passport, Driver’s License
  • Proof of Address: Utility bills, bank statements, rental agreements or lease contracts

Businesses

  • Proof of Identity for Legal Entities: Certificate of Incorporation, Memorandum and Articles of Association, Registration with relevant regulatory authorities
  • Proof of Business Registration: Business registration documents/certificate, business licenses and permits
  • Source of Funds or Wealth Documentation: Bank statements to demonstrate the source of funds, documentation of business income

Implementing an Effective AML Compliance Program

To implement an effective AML compliance program, financial institutions should:

  • Assess Risks Specific to Operations: Assess risks specific to their operations
  • Develop Policies and Procedures: Develop policies and procedures tailored to identified risks
  • Implement Internal Controls: Implement internal controls to ensure compliance with AML policies
  • Designate an AML Compliance Officer: Designate a dedicated AML compliance officer
  • Regularly Review and Update the Program: Regularly review and update the AML program to address new risks and comply with changing regulations.

Leveraging Automated KYC Solutions

An automated KYC solution can help financial institutions easily meet CBK requirements by combining automated KYC, KYB, and AML checks on a single platform.