The central banks of neighbouring countries have been warned to be on the lookout for individuals who might want to launder Kenyan money.
Local banks and forex bureaus are also on high alert after the State set out to ensure that illicit money does not enter the financial system with the roll-out of the new currency.
The Central Bank of Kenya (CBK) yesterday announced a raft of measures that will dictate how nearly Sh218 billion in Sh1,000 denomination will be mopped up from circulation in the next four months.
CBK Governor Patrick Njoroge said individuals who want to exchange more than Sh5 million, and individuals without bank accounts, will first be required to contact CBK for endorsement before proceeding to designated banks.
“For between Sh1 million to Sh5 million, you will need to go to your bank where they know you and your type of business. They will still ask the usual questions and you will sign the usual declaration forms just like it has been done before,” said Dr Njoroge.
Persons who do not operate a bank account but have less than Sh1 million can walk into any bank and exchange the money provided they give their details and prove that the money belongs to them.
The measures are part of stringent procedures put in place to deal with individuals engaged in illicit cash flows as the country intensifies its war on corruption.
The CBK boss defended the planned withdrawal of the Sh1,000 note from circulation, saying the decision was informed by the Government’s desire to deal with money laundering and the proliferation of fake currency. Commercial banks have already been briefed on the measures even as the CBK said it was working with regional central banks to ensure the exercise was a success.
The CBK boss met with representatives of commercial banks in the morning hours, and by last evening he was meeting agents of forex bureaus.
“I have just spoken to the CEOs and CFOs of commercial banks and micro-finances. I will talk with foreign exchange bureaus and money remittance providers to make sure all this is dealt with. We want to make sure that anti-money laundering and countering financing of terrorism framework is robust,” said Njoroge.
He added, “I will be communicating with our sister central banks to explain to them what we are doing. We need their cooperation. You do not need money going to other jurisdictions in order to return to this jurisdiction. Illicit financial flows involving the Kenya Shilling are not just in Kenya. They also affect our neighbouring countries.”
Njoroge spoke even as two cases were filed in court seeking to stop the introduction of the new currency on grounds that it has images prohibited by the Constitution.
East Africa Legislative Assembly member Simon Mbugua and activist Okiya Omtatah filed separate cases, which cited the image of a statue of President Jomo Kenyatta.
However, the CBK boss dismissed critics of the new-look currency saying all laws were followed, including public participation. He said the Kenyatta International Conference Centre was an iconic building, adding that the bank would quickly move to defend the cases to end any uncertainty.
“I have been informed of a legal challenge that has just been filed. We are going to deal with those issues as a matter of priority. There is nothing worse than having uncertainty with regards to currency matters.”
The CBK, at the same time, released data on the number of notes in circulation. These include 217.6 million pieces of Sh1,000 and 30.8 million pieces of Sh500 notes.
There are 54.8 million pieces of Sh200 notes, Sh126.4 million pieces of Sh100 notes and 100.5 million pieces of Sh50 no
There are also 9.9 million pieces of Sh20.
The CBK is also facing criticism over its decision to recall the Sh1,000 note with fears that the country may go the India way, where a similar exercise was done in 2016 but appeared to have had limited success.
“We looked at the matter of demonetisation in India and learned from it. There wasn’t enough cash in the bank branches at the time the announcement was made (in India). We are ensuring that there is enough cash in all the bank branches,” Njoroge said.
Unlike in India, the CBK boss said Kenya has provided sufficient time for demonetisation and thus remains confident the move will not hurt the economy.
“They demonetised immediately. Imagine if you are a truck driver, and when it was announced, you could not buy food or fuel. You couldn’t rush to the bank to change money. This is why we have allowed a period for transaction to continue.
“We have allowed time for the withdrawal of the bank notes because we need to take care of our people. We need to ensure Wanjiku has all relevant information and has enough time for the changeover.”
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