In February, Sh32 billion in fake foreign currency was found in a residential house in Ruiru town, while in October 2018, fake foreign cash totalling Sh1 billion was recovered at an apartment in Westlands, Nairobi. In all, the police have found over Sh35 billion in fake foreign currency in Nairobi in less than six months.
Perhaps the most daring of these fake currency acts has been the attempt to hide over Sh2 billion in a safe deposit box of a tier-1 bank at the heart of the Nairobi city centre. Ordinarily, criminals hide cash, and only take it to the bank when they want to “clean it” and use it for seemingly legitimate purposes.
For bank staff, safe deposit boxes present a particularly difficult channel to monitor because they are private and accessible only to the holder or his authorised agent.
What can banks do to continue rendering the safe deposit box services while still satisfying Central Bank of Kenya and international anti-money laundering compliance requirements to monitor and report suspicious activities involving safe deposit boxes? How do you define “suspicious” when the bank is blind to what is stored in the deposit boxes?
While banks often require that safe boxes are only granted to existing bank customers, this is insufficient. Such customers should have been in existence for a period of time sufficient for the bank to build a transactional history of the account. Otherwise customers will open an account just to get the benefit of a safe deposit box.
In the absence of a transactional history, banks may perform background checks using systems such as Refinitiv’s World Check service to highlight potential high risk and politically exposed customers. This will help to understand the customer, his activities and reasons for having a safe deposit box.
Given that there are no “transactions” involved when handling safe deposit boxes, a transaction monitoring system will be of little use in detecting suspicious activities involving such customers. The bank will rely on its frontline staff to identify and report suspicious acts.
Frontline staff should note unusually frequent visits particularly if they are inconsistent with the customer’s declared business. A discrepancy between the customer’s profile and his need for a safe deposit box is a potential red flag. For example, elderly persons, students or persons from an out-of-town area may be used as cover for the true owners of the safe deposit box.
A change in visiting patterns may also provide a red flag. For example, a customer may start carrying larger bags in and out of the secure area or spend longer in the safe deposit box area. These may indicate illegal activities going on there. Customers who always come in at the same time or shortly before or after another client but have not declared any relationship may also be potential red flags.
A customer with frequent visits to the safe deposit box area but no transactional activity in his bank accounts may also pose a higher risk. A person who makes deposits slightly below the reportable amounts immediately after visiting his safe deposit box would also be of interest to the bank. This may be an indication of large amounts of cash held in the deposit boxes being laundered as small deposits to avoid regulatory scrutiny.
Cases where the authorised agent appears to have more interest in the safe deposit box than the primary customer may also suggest that the primary customer is being used as a cover for the true beneficial owner. This may also be the case where a customer with a long transactional history is only named as an authorised agent and not the primary safe deposit box holder whereas the primary box holder is relatively new to the bank.
While the indicators above cannot by themselves be relied on as proof that a safe deposit box holder is laundering money, they provide potential red flags.
Trained front-office staff are important in identifying suspicious behaviour and quickly reporting such to the financial reporting centre.
The writer is Risk & Financial Crime Specialist, East & West Africa, Refinitiv.
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.