This archive report was first published on 25 September 2019.
Illicit Cash Concerns Linger Amid Demonetization ¶
Published on September 25, 2019
The Central Bank of Kenya's (CBK) demonetization efforts have raised more questions than answers, with experts questioning the sum total of illicit flows within the financial system.
According to data from the CBK, 58% of transactions in the three months to September 1 were below Ksh.500,000 in value, with only 24 individuals bringing forth sums in excess of Ksh.2 million to the interchange.
CBK Governor Patrick Njoroge had previously raised concerns about the use of older Ksh.1000 series notes for illicit financial flows, stating, 'We have accessed the grave concern that our large bank notes, particularly the older Ksh.1000 series are being used for illicit financial flows and in other countries in the region.'
However, the CBK has made the additional disclosure of suspect transactions, which might point in the direction of covert clean-up operations.
Analysts have queried the sum total of the perceived illicit flows within the financial system, with Kenya Business Guide research analyst Titus Maina stating, 'The CBK may as well have over-estimated the sum of money held in the 'black economy'. Alternatively, illicit cash might have been well embedded in the system to filter right through the sieve.'
The success or failure of the demonetization process will be determined by the disclosure of the 'magic' demonetized notes upon the rounding up of the process on September 30.
