Kenya’s new plan to wipe out financial criminal enterprise faces a litmus test

Kenya Bankers Association said its members were well-equipped to handle the transition to the new currency regime. PHOTO | FILE | NATION MEDIA GROUP 

In Summary

• Kenyans have continued to debate the possible impact of the sudden withdrawal of the notes on trade and pricing of goods and services as well as its effectiveness in dealing with tax evaders and hoarders of illicit funds.

By JAMES ANYANZWA
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Kenya’s decision to withdraw its Ksh1,000 ($10) notes from circulation by October 1 was last week facing strong legal headwinds in the form of two legal suits against the Central Bank of Kenya.

The suits seek to challenge Central Bank of Kenya governor Patrick Njoroge’s decision to use the transition to new bank notes to strike the nerve centre of the multibillion shilling illicit financial flows industry that has recently benefited from massive looting and hoarding of public funds in private homes.

That decision came in the form of an order withdrawing from circulation the Ksh1,000 note by October 1 — giving holders of the notes 90 days to comply.

“By Gazette Notice No. 4849 of May 31, 2019, all the older Ksh1,000 banknotes shall be withdrawn and will cease to be legal tender on October 1, 2019. All other denominations are unaffected and will continue to circulate alongside the New Generation banknotes,” the CBK said in a statement Thursday adding that the objective of the measure is “to deal conclusively with emerging concerns about illicit financial flows and counterfeits.”

Aside from questioning the legality of the sudden withdrawal of the Ksh1,000 notes from circulation (a process also known as demonetisation), the suits are also challenging use of the image of Kenya’s founding president Jomo Kenyatta on the notes contrary to the constitutional provision barring use an individual’s portrait on Kenyan money.

The CBK has maintained that demonetisation of the currency is meant to curb illicit financial flows, money laundering and terrorism financing, the three major vices which it believes have rocked the Kenyan economy in the recent past and denied the exchequer the much needed revenues through tax evasion.