This archive report was first published on 26 June 2020.
Published on June 26, 2020, the Central Bank of Kenya (CBK) has issued a bold directive to commercial banks, requiring them to open and declare the contents of all safe deposit boxes in their custody.
The move is aimed at tackling one of the weakest links in the country's anti-money laundering laws, following a high-profile incident in March 2019 where $20 million worth of fake currency notes were discovered in a safe deposit box at Barclays Bank of Kenya's Queensway Branch.
Barclays denied any culpability, stating that the contents of personal deposit boxes were only known to their owners. However, the bank subsequently discontinued the safe deposit service and reviewed the existing deposit boxes with its customers.
The CBK's new directive is seen as a wake-up call for regulatory authorities, who must now ensure that banks comply with the new regulations.
With an estimated 2,000 safe deposit boxes held in the banking system remaining unclaimed, the CBK has urged banks to involve the Unclaimed Financial Assets Authority (UFAA) in the process of opening the boxes.
However, experts warn that simply killing the safe deposit boxes will not be enough to combat money laundering. The CBK must also put more effort into sealing loopholes in the existing anti-money laundering regime and framework, which have been exploited by criminals in the past.
One such loophole was exposed during the DusitD2 terrorist attack in 2019, where it was revealed that criminals had used false identification documents to obtain subscriber status and register multiple distributor agency shops, allowing them to withdraw large sums of money from banks and evade reporting.
Managing threats posed by international money laundering syndicates remains a major challenge for Kenya, and the CBK must make blocking all loopholes that criminals exploit a top priority.
On paper, Kenya has a comprehensive regime and legal framework for dealing with anti-money laundering, including the proceeds of crime and anti-money laundering law, and legislation specifically dealing with combating terrorism financing.
However, the laws and institutions are still not effective, and the CBK must introduce tougher rules to compel forex bureaus to regularly report shadowy transactions.
Money laundering poses serious economic challenges to a country, causing unpredictability and volatility of both the exchange rate and interest rates, and redirecting incomes from sound to low-quality investments.
