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Kenya’s Banking Industry Adheres to Best Practices for Compliance Amidst Growing Money Laundering Concerns

In the face of Kenya’s rapidly growing cryptocurrency market, concerns about money laundering and terrorism financing have reached a fever pitch. In response, the Central Bank of Kenya has issued new regulations aimed at combating these threats.

New Regulations Introduced

The Anti-Money Laundering and Combating of Terrorism Financing Laws (Amendment) Act, 2023, has introduced heightened compliance obligations for private companies with a paid-up capital below KES 5,000,000. Under this law, such companies must appoint a local director who is a resident of Kenya.

Key Requirements for AML Compliance

Under the purview of the Central Bank of Kenya, institutions tasked with ensuring compliance include:

  • Commercial banks
  • Mortgage finance companies
  • Microfinance banks
  • Money remittance providers
  • Foreign exchange bureaus
  • Digital credit providers
  • Payments service providers
  • Mortgage refinance companies

A cornerstone of CBK AML-compliance is conducting a risk assessment. This formal written assessment identifies all possible risks associated with money laundering and potential ways to manage these risks. The document must be updated every two years or when changes are made to the guidelines.

Conducting an AML Risk Assessment

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

  • Identify and assess money laundering and terrorism financing risks associated with your institution’s unique combination of products and services, customers, geographic locations, and delivery channels.
  • Conduct a detailed analysis of all available data to assess the level of risk within each high-risk category.
  • Determine whether your organization’s AML compliance program is adequate and provides necessary controls to mitigate identified risks.

KYC/KYB Verification

Know-your-customer (KYC) or know-your-business (KYB) verification is a required practice to comply with most AML policies. The CBK requires specific documents for verifying the identity of individuals or entities involved in financial transactions in Kenya. These checks typically require:

  • Proof of identity
  • Proof of address
  • Source of funds documentation

Automated KYC Solution

An automated KYC solution can help businesses meet the CBK’s requirements on a single platform. With Smile ID integration, users can verify required identity documents and screen against global and African sanctions, PEP, and adverse media watchlists in a few simple steps.

Conclusion

By adhering to these best practices for AML compliance, Kenya’s banking industry can ensure that financial transactions are secure and transparent, reducing the risk of money laundering and terrorism financing.