Cash transaction limits to be revised, President William Ruto says

cash

The Central Bank of Kenya is working on modalities to increase the amount allowed in large cash transactions without having to report to the regulator.

Photo credit: File | Nation Media Group

The Central Bank of Kenya is working on modalities to increase the amount allowed in large cash transactions without having to report to the regulator, President William Ruto has said.

He explained that the current limit of Sh1 million is hindering business and driving people away from the formal financial system.

The current law requires that financial institutions report any of their customers’ cash transactions above Sh1 million ($10,000) to the Financial Reporting Centre (FRC) to enable the authorities to detect illicit financial flows such as money laundering.

It is not clear how this will be done because the law is applied internationally through the United Nations Security Council’s Anti-Money Laundering (AML) and Combating Financing of Terrorism (CFT) frameworks, to which Kenya is a signatory. The frameworks require the reporting of any cash transactions of at least $10,000.

President Ruto yesterday said traders had complained about the difficulties they face while conducting transactions worth Sh1 million and above due to the set limit, stating that the law had become a hindrance to genuine business transactions.

President Ruto's inaugural address

“Many have reverted to storing money under their mattresses, at great security risk. This is clearly not the intention of the anti-money laundering regulations. While we remain fully committed to mitigating this risk, we believe that there is scope to make compliance less burdensome on genuine business transactions,” he said.

He added that the financial sector regulator had assured him that work to ease the burden without compromising the security of Kenya’s financial system is going on.

“Shortly, I will be announcing to the country what we have agreed with the Central Bank so that Kenyans can go ahead and facilitate their transactions without unnecessary impediments,” President Ruto said.

In October 2021, his predecessor, Uhuru Kenyatta, made a similar attempt, but it failed because Kenya does not have the appropriate law to effect the change.

During the Mashujaa Day celebrations last year, President Kenyatta promised to raise the limit for reporting the large cash transactions by banks from Sh1 million to Sh5 million, stating that adoption of digital banking channels had made it easier to track illicit financial flows.

He agreed that the stringent cash transaction reporting limits had restricted trade by cash-heavy businesses, driving many out of formal banking channels.

“I hereby further order the National Treasury, after consultations with other stakeholders, to immediately cause the upward revision of the cash transactions reporting threshold from the current mark of Sh1 million,” the former president said.

However, banks have not implemented the directive since there are no guidelines to effect it. The CBK, as the regulator, is expected to provide direction.

The International Monetary Fund, in its latest review report on Kenya, also noted that in a bid to strengthen the AML/CFT framework, the law was amended to require lawyers to also declare suspicious activity this year while other actions are expected starting this month.

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