Financial Crime World

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Kenya’s Businesses Face Increased Scrutiny as CBK Cracks Down on AML Compliance

In the wake of Kenya’s growing cryptocurrency market, officials have sounded the alarm over increased risks of money laundering and terrorism financing across the country’s finance sector. Central Bank Governor Kamau Thugge has called for international regulations to address these emerging threats and urges local businesses to be vigilant.

To Combat Risks, CBK Releases Updated Regulatory Guidelines

To combat these risks, the Central Bank of Kenya (CBK) has released updated regulatory guidelines to heighten compliance obligations. The Anti-Money Laundering and Combating of Terrorism Financing Laws (Amendment) Act, 2023, implemented on September 29th, imposes stricter requirements on private companies with a paid-up capital below KES 5,000,000.

Who Must Comply with AML Guidelines?

The CBK supervises and enforces compliance with the Anti-Money Laundering Act (POCAMLA) for various institutions, including:

  • Commercial Banks
  • Mortgage Finance Companies
  • Microfinance Banks
  • Money Remittance Providers
  • Foreign Exchange Bureaus
  • Digital Credit Providers
  • Payments Service Providers
  • Mortgage Refinance Companies

Key Requirements for AML Compliance

The cornerstone of CBK’s AML-compliance is conducting a risk assessment, which identifies potential risks and ways to manage them. This document must be updated every two years or when changes are made to the guidelines.

According to CBK/PG/08 Clause 5.15, the development of an AML risk assessment framework involves:

  • Identifying and assessing money laundering and terrorism financing risks associated with products, services, customers, geographic locations, and delivery channels.
  • Conducting a detailed analysis of available data to assess risk levels within each high-risk category.
  • Allocating sufficient resources for the risk assessment process.

KYC/KYB Verification Documents

Know your customer (KYC) or know your business (KYB) verification is a required practice to comply with most AML policies, including the CBK’s guidelines. These checks typically require specific documents to verify the identity of individuals or entities involved in financial transactions in Kenya.

Additional Tips for Compliance

To meet the CBK’s requirements, businesses can consider using automated KYC and AML checks on a single platform. With Smile ID integration, users can verify required identity documents and screen against over 1100 global and African sanctions, PEP, and adverse media watchlists in just a few steps.

Conclusion

As Kenya’s finance sector continues to evolve, businesses must remain vigilant about compliance with the CBK’s AML guidelines. By understanding these requirements and implementing effective measures, companies can minimize risks and maintain a strong reputation in the industry.