Stockbrokers to report suspect trade deals

A customer carries out a transaction at an M-Pesa outlet. The Treasury has recently passed a raft of anti-money laundering regulations affecting transactions in the banking, electronic, mobile money and informal money transfer sectors. FILE  NATION MEDIA GROUP

By John Gachiri

In Summary

• A Kenya Gazette notice issued last month has now made it compulsory for operators in the capital markets and insurance sectors to also report any suspicious activity to the FRC.

Stockbrokers, insurance firms and saccos are set to start reporting “suspicious” transactions to the Financial Reporting Centre (FRC), the State watchdog established to track money laundering.

FRC chairman John Wanyela says commercial banks are already reporting suspicious transactions to the body that was formed late last year amid pressure from the international community for Kenya to tighten its money laundering laws.

A Kenya Gazette notice issued last month has now made it compulsory for operators in the capital markets and insurance sectors to also report any suspicious activity to the FRC.

“The law became enforceable in April. It will still take some time before all financial entities can join banks in reporting fraudulent transactions as you do not want to ambush people before you make them understand their role,” said Mr Wanyela in an interview.

The Treasury has recently passed a raft of anti-money laundering regulations affecting transactions in the banking, electronic, mobile money and informal money transfer sectors.

(Read: CBK issues rules to curb mobile money laundering)

Efforts to tighten regulation of the financial sector came after the Financial Action Task Force (FATF), a group of 34 mostly western countries, put Kenya on a watchlist demanding it tightens its regulations and enforce anti-money laundering (AML) and terrorism financing laws.

 

Stockbrokers, like commercial banks, will be required to report any transaction greater than $10,000 (Sh837,000) to the FRC for investigation.

The anti-money laundering rules require that any financial service provider “takes reasonable measures to satisfy itself as to the true identity of any applicant seeking to … carry out a transaction …, by requiring … the true identity of the applicant, such as a birth certificate, passport, national identity card, a drivers’ licence or other official means of identification as may be set forth in other regulation.”

The rules state that “in deciding whether a person committed an offence under this section the court must consider whether he/she followed any relevant guidance at the time concerned issued by a supervisory authority or any other appropriate body, approved by the Financial Reporting Centre.”

Strict guidelines

The Treasury has also committed to the International Monetary Fund (IMF) that it will enforce the anti-money laundering regulations in the capital market and insurance sectors in a document dated March 28, signed by former Finance minister Njeru Githae and Central Bank of Kenya (CBK) governor Njuguna Ndung’u.

The strict reporting guidelines are part of the government’s commitment to the IMF to enable it access a $760 million (Sh64 billion) foreign exchange support loan.

(Read: IMF sets Treasury tough reporting guidelines)

“The Financial Reporting Centre (FRC), Kenya’s financial intelligence unit, has become operational and has begun receiving suspicious transaction reports from financial institutions that fall under the purview of the CBK.