KCB #ticker:KCB and Equity #ticker:EQTY banks bore the brunt of the Central Bank of Kenya’s (CBK) unprecedented action against five banks for aiding the transfer of billions of shillings siphoned from the National Youth Service (NYS).
The CBK said in a statement released Wednesday that it had fined KCB, Equity, Standard Chartered Bank Kenya #ticker:SCBK, DTB #ticker:DTK and Co-op Bank #ticker:COOP a total of Sh392.5 million for their role in aiding the flow of Sh3.5 billion that flouted anti-money laundering laws among other banking regulations.
Using its discretionary powers, the CBK imposed the severe fines even on banks that handled relatively smaller sums, signalling that the regulator also took into account other factors such as repeat offences and sloppy cultures that allowed the illicit transactions.
“CBK has assessed monetary penalties for each of the five banks in accordance with the extent of the violations that were identified and pursuant to CBK’s powers under the Banking Act and the Central Bank of Kenya Act,” the statement said.
While the fines ranging from Sh20 million to Sh149.5 million are big, they are unlikely to have a significant impact on profitability of the lenders this year.
If similar penalties are to be imposed for such malpractices in future, the cost could turn out to be heavy for banks that have previously paid a few millions for similar violations.
KCB, which is Kenya’s biggest bank, was fined Sh149.5 million, arguably the largest sum that a Kenyan bank has paid for offences committed under the Banking Act. The bank handled Sh639 million of the NYS cash, meaning the fine amounts to 23.3 per cent of the illicit cash.
The penalty is equivalent to three days of KCB’s net profit, based on the bank’s performance in the year ended December 2017.
KCB said in a statement that it was considering the issues raised in the CBK action and promised to respond in 14 days. “We are reviewing the CBK report and will respond to the issues raised conclusively within 14 days,” the bank said.
The other lenders issued similar statements promising to co-operate with the regulator.
Equity, the second largest bank, will pay an Sh89.5 million fine for its role in aiding the transfer of Sh886 million or 10.1 per cent of the NYS flows. The bank earns the fine in about two days.
“We emphasise that at this point no penalty has been imposed by the Central Bank of Kenya,” said the bank, pledging to respond to the issues with CBK.
StanChart will pay Sh77.5 million despite handling the largest sum of Sh1.6 billion, indicating that the lender’s internal control processes and compliance standards may have been strong enough to warrant a lighter punishment. For StanChart, the penalty is equivalent to giving up four days’ worth of profits.
If the regulator’s actions stand unchallenged, DTB will pay Sh56 million or 34.5 per cent of the Sh162 million it handled. The fine amounts to the largest disgorgement rate among the five institutions. DTB earns the penalty in about three days.
Co-op Bank has been hit with the smallest fine of Sh20 million, representing 7.6 per cent of the Sh263 million NYS deposits it received. It needs half a day to pay the fine.
The CBK said the institutions were penalised for breaking banking laws, including failure to report large cash transactions, failure to undertake adequate customer due diligence, lack of supporting documentation for large transactions, and lapses in the reporting of suspicious transaction to the Financial Reporting Centre (FRC).
The CBK said it had imposed the fines upon conclusion of the first phase of investigations, adding that more institutions will be identified and investigated in the near future.
The CBK said it had initially focused on the five banks because they handled the largest amounts in the NYS scam where individuals and companies were paid without delivering goods or services.
The regulator says it has discussed its findings with the boards and senior management of the banks, adding that each has expressed strong commitment to be fully compliant on all aspects of the law and to address the identified lapses through time-bound action plans.
The remedial action plans are to be submitted to CBK within 14 days. CBK says it will work with all other banks to ensure that the findings are also applied to strengthen rules combating financing of terrorism and money laundering.
Besides the financial penalty, the named banks have suffered reputational damage from CBK’s rare name and shame campaign.
World Bank pushes G-20 to extend debt relief to 2021
World Bank Group President David Malpass has urged the Group of 20 rich countries to extend the time frame of the Debt Service Suspension Initiative(DSSI) through the end of 2021, calling it one of the key factors in strengthening global recovery.
“I urge you to extend the time frame of the DSSI through the end of 2021 and commit to giving the initiative as broad a scope as possible,” said Malpass.
He made these remarks at last week’s virtual G20 Finance Ministers and Central Bank Governors Meeting.
The World Bank Chief said the COVID-19 pandemic has triggered the deepest global recession in decades and what may turn out to be one of the most unequal in terms of impact.
People in developing countries are particularly hard hit by capital outflows, declines in remittances, the collapse of informal labor markets, and social safety nets that are much less robust than in the advanced economies.
For the poorest countries, poverty is rising rapidly, median incomes are falling and growth is deeply negative.
Debt burdens, already unsustainable for many countries, are rising to crisis levels.
“The situation in developing countries is increasingly desperate. Time is short. We need to take action quickly on debt suspension, debt reduction, debt resolution mechanisms and debt transparency,” said Malpass.
Kenya’s Central Bank Drafts New Laws to Regulate Non-Bank Digital Loans
The Central Bank of Kenya (CBK) will regulate interest rates charged on mobile loans by digital lending platforms if amendments on the Central bank of Kenya Act pass to law. The amendments will require digital lenders to seek approval from CBK before launching new products or changing interest rates on loans among other charges, just like commercial banks.
“The principal objective of this bill is to amend the Central bank of Kenya Act to regulate the conduct of providers of digital financial products and services,” reads a notice on the bill. “CBK will have an obligation of ensuring that there is fair and non-discriminatory marketplace access to credit.”
According to Business Daily, the legislation will also enable the Central Bank to monitor non-performing loans, capping the limit at not twice the amount of the defaulted loan while protecting consumers from predatory lending by digital loan platforms.
Tighter Reins on Platforms for Mobile Loans
The legislation will boost efforts to protect customers, building upon a previous gazette notice that blocked lenders from blacklisting non-performing loans below Ksh 1000. The CBK also withdrew submissions of unregulated mobile loan platforms into Credit Reference Bureau. The withdrawal came after complaints of misuse over data in the Credit Information Sharing (CIS) System available for lenders.
Last year, Kenya had over 49 platforms providing mobile loans, taking advantage of regulation gaps to charge obscene rates as high as 150% a year. While most platforms allow borrowers to prepay within a month, creditors still pay the full amount plus interest.
Amendments in the CBK Act will help shield consumers from high-interest rates as well as offer transparency on terms of digital loans.
Scope Markets Kenya customers to have instant access to global financial markets
NAIROBI, Kenya, Jul 20 – Clients trading through the Scope Markets Kenya trading platform will get instant access to global financial markets and wider investment options.
This follows the launch of a new Scope Markets app, available on both the Google PlayStore and IOS Apple Store.
The Scope Markets app offers clients over 500 investment opportunities across global financial markets.
The Scope Markets app has a brand new user interface that is very user friendly, following feedback from customers.
The application offers real-time quotes; newsfeeds; research facilities, and a chat feature which enables a customer to make direct contact with the Customer Service Team during trading days (Monday to Friday).
The platform also offers an enhanced client interface including catering for those who trade at night.
The client will get instant access to several asset classes in the global financial markets including; Single Stocks CFDs (US, UK, EU) such as Facebook, Amazon, Apple, Netflix and Google, BP, Carrefour; Indices (Nasdaq, FTSE UK), Metals (Gold, Silver); Currencies (60+ Pairs), Commodities (Oil, Natural Gas).
The launch is part of Scope Markets Kenya strategy of enriching the customer experience while offering clients access to global trading opportunities.
Scope Markets Kenya CEO, Kevin Ng’ang’a observed, “the Sope Markets app is very easy to use especially when executing trades. Customers are at the heart of everything we do. We designed the Scope Markets app with the customer experience in mind as we seek to respond to feedback from our customers.”
He added that enhancing the client experience builds upon the robust trading platform, Meta Trader 5, unveiled in 2019, enabling Scope Markets Kenya to broaden the asset classes available on the trading platform.