CBK boss warns MPs on dangers of scrapping law on cash limits

Central Bank of Kenya (CBK) Governor Patrick Njoroge (R) accompanied by his deputy Sheila M'Mbijjewe when they appaered before the National Assembly Finance Committee. [Boniface Okendo/Standard]

Kenya risks being locked out of the global payment system if it amends the rules on disclosure of cash transactions exceeding Sh1 million.

Central Bank of Kenya (CBK) Governor Dr Patrick Njoroge warned yesterday that the push by MPs to lift limits of daily cash transfers would attract a global backlash which would classify Kenya as a high risk country.

“We expect adverse impact where foreign correspondent banks face closure of accounts, regional links would be threatened, we would be cut off and Kenya would be blacklisted. And worst of all, the war against corruption would be lost,” Dr Njoroge told the National Assembly Finance Committee at Parliament buildings.

He was appearing before the committee to explain possible hurdles in implementing section 33C of the Banking Act contained in the Finance Act of 2018.

He said the economy would also suffer adversely along the lines of the Goldenberg scandal in terms of inflation, currency depreciation, rise in the cost of State borrowing and GDP decline as a result of being isolated by the global systems.

But Finance and Planning Committee Chairman Joseph Limo said CBK was wrongly painting Parliament as trying to roll back gains on the fight against money laundering while in fact, it was seeking to oversight the regulator.

“The amendment is not to remove the regulations, but MPs want to ensure they give it the full force of the law. We are trying to help you to legalise your memos and circulars,” said Limo.

Kenya was placed on the “grey” list by the Financial Action Task Force which was only lifted in 2014. The task force is tasked with developing policies to combat money laundering.

MPs sneaked a clause in last year’s finance law that would have compelled CBK to draft regulations on how much you can withdraw then have Parliament vote on them.

MPs claim that CBK has been using “circulars” and “memos” on the cash limits which lack the full force of the law. They have, however, openly shown disdain for the rules on disclosures on transactions exceeding Sh1 million, which has been the main motivation to rein in the regulator.

Sort out inconsistencies

“The Central Bank shall within 30 days of coming in to force of this Act, prescribe  regulations setting out conditions for deposits and withdrawals by customers in banks and financial institutions in accordance with the Statutory Instruments Act,” reads the Finance Act.

Dr Njoroge said the clause was “unimplementable” as it conflicted with other laws and CBK was ambushed by the law and could not work with the 30-day timetable to sort out the inconsistencies.

CBK said it went to the Attorney General after realising the flaws, but even before the State counsel could pronounce a legal opinion, the law was challenged in court subject to a hearing on March 29.

“We did not know the law was being discussed and only found out when it was assented and brought to us for implementation,” said Dr Njoroge.

“It became clear that it contradicted many other law and it was impossible to implement, and no matter what we would try we would fall on our face,” he said.