Here is my take on this week’s decision by Central Bank of Kenya (CBK) governor Patrick Njoroge to slap fines on five banks found to have aided the transfer of billions of shillings siphoned from the National Youth Service (NYS) by well-connected individuals.
First, this is the first time a financial sector regulator in this country is coming out strongly to slap fines in this manner. We must congratulate the governor for demonstrating this level of boldness. Indeed, and in terms of proper flexing of regulatory power, this is a first for Kenya.
How systemic and widespread is the problem of lapses and poor reporting of anti-money laundering and suspicious transactions in our financial sector? That was the question that was top in my mind as I pondered over the implications of this brave move by Dr Njoroge.
In future, and if the governor really wants to make a big impact in enforcing reporting on anti-money laundering, he should go deeper and punish individuals and directors responsible for reporting on suspicious transactions within specific commercial banks.
After all, the CBK wields approval powers over appointment of top managers of banks. The CBK may also wish – in future -to disclose a little more information and details about the transactions even if names are redacted. According to the statement put out by CBK, Standard Chartered Bank, which processed and paid Sh1.6 billion of the money got away with a fine of Sh77 million, while Kenya Commercial Bank which processed just under a half- was fined Sh 149 million.
The second observation I made as I pondered this latest move was the fact that it affected top rated banks.
If all our top banks can be found to have shown material weaknesses and lapses in reporting suspicious transactions as has been demonstrated by the CBK, what should we expect of smaller banks with less resources to devote to anti-money laundering reporting?
Do banks, really, take the job of reporting suspicious transactions seriously? After all, the companies that were receiving corrupt payments from the NYS should have looked suspicious even to a layman.
Most of them were relatively new outfits, with no internet presence and no turnover to show. And in most cases these were accounts that had zero balances before they received the looted cash from the NYS.
According to a report in the Daily Nation, companies that were receiving billions from the NYS carried names such as JerryCathy Ltd, Calabash Investments, Ngiwako Enterprises, Annwaw Investments and Firstlings Supplies Ltd. Thus, flagging the payments as suspicious should not have been difficult at all.
The picture portrayed is very troubling considering that we are a country battling with the twin problems of terrorism financing and corruption. How can we prevent terrorists from misusing our financial system when our very top rated banks display material lapses in suspicious transactions reporting? Kenya has built an elaborate patch work of anti-money laundering institutions that include the Central Bank itself, the Financial Reporting Centre (FRC) and the Assets Recovery Agency. But it seems that they do not sing from the same hymn book.
In the first place, the FRC remains an underfunded entity. It lacks the resources- staff, money and systems- to be able to respond to the volumes of reports it receives on a daily basis. Despite the fact that it was created under its own act of Parliament, it still operates more or less as an appendage of the CBK.
Granted, the central bank commands overall authority on financial affairs. But when it comes to reporting on suspicious transactions, the FRC is the primary regulator. Yet this critical institution has been made to operate as CBK’s poor cousin. As a matter of fact, most of its employees are seconded from the central bank.
It seems to me that for the FRC to work, it will need an advanced and smart database able to deploy artificial intelligence to interpret the data that banks send it every day.
Once it is well equipped with people, money and systems we can then work on developing the legal capacity and infrastructure to trace, seize, and confiscate the proceeds of illegal payments and suspicious currency transactions.
Looking at the structure of our financial system closely, there is enough to arouse suspicions, and suggest that the vice could be rampant. Dr Njoroge must keep cracking the whip because money laundering is a matter of national security.
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.