New bank notes order will smash graft, fake gold rings
Investigative agencies have said the directive on new currency will help smash money laundering and fake gold syndicates, even as other experts urged careful rollout so as not to disrupt the economy.
Reacting to Saturday’s order that old Sh1,000 notes will be withdrawn from October 1, experts drawn from various professions said this would curb illicit financial flows in the country. They, however, cautioned that if the execution is mismanaged, it could plunge the economy into high inflation.
Properly implemented, the currency change by the Central Bank of Kenya (CBK) will deal a blow to the black market economy and strengthen the financial position of the country, they added.
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Directorate of Criminal Investigations boss George Kinoti and Ethics and Anti-Corruption chief executive officer Twalib Mbarak said the directive was a boost to the ongoing war on corruption.
“It’s one way of fighting fake money, scamming and laundering. Corruption must fall,” said Kinoti.
Mbarak added: “It can be useful to inform Kenyans how the introduction of Sh1,000 new notes will curtail criminal economy of laundering, gold scamming, and corruption networks, including tax evaders.”
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Kenya Bankers Association Chief Executive Officer Habil Olaka said it would be difficult for money launderers to escape the eyes of law enforcement agencies.
Olaka explained that even if the deposits are made in amounts below the Sh1 million threshold, the banks can identify the trend and report suspicious transactions.
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“Under the anti-money laundering laws and guidelines, four months is a very short time to clean significant amounts as bankers are required to strictly adhere to the laws,” Olaka said.
He added that assuming the illegal money is to be exchanged in foreign currencies to hide the money trail, bureaus must also report any substantial transactions to make it nearly impossible for laundering.
Machakos Governor Alfred Mutua said life is about to get complicated, especially for public servants who have billions hidden in mouldy basements. “I urge investigative bodies to track money being banked or converted into US dollars. What cannot be accounted for should be taken by the State and used to buffer the Exchequer,” said Mutua.
He, however, said Kenyans must acknowledge some people keep legally obtained cash instead of banking it and they should be allowed to change what they have to the new bills.
John Githongo, a former principal secretary and anti-corruption crusader, is not optimistic that the issuance of new bank notes will deal with illicit money.
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Githongo cited past experiences in India where the unanticipated withdrawal and subsequent replacement of currency bills caused upheaval, including the loss of 1.5 million jobs.
National Assembly Minority Leader John Mbadi (Suba South) argued that the plan by CBK to withdraw the Sh1,000 notes by October 1, if not done well, will sink the economy into inflation.
On Saturday during the Madaraka Day celebrations in Narok, CBK Governor Patrick Njoroge announced that the Sh1,000 notes will cease being legal tenders by October 1, 2019.
“All persons have until October 1, 2019, to exchange Sh1,000 bank notes for the new generation bank notes, after which the older notes will cease to be legal tender,” said Njoroge.
National Assembly Budget and Appropriations Committee Chair Kimani Ichungwa (Kikuyu) said that all the notes should be withdrawn and not just Sh1,000 note.
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Ichung’wa explained that the change of currency was long overdue and in compliance with the current constitutional dispensation.
Nzamba Kitonga, the chair of the defunct Committee of Experts (CoE) that midwifed the 2010 supreme law, said the change of the currency was long overdue. He added that the regulation to withdraw the old Sh1,000 notes should not worry law abiding citizens.
The deadline should not be extended, Amani National Congress party Musalia Mudavadi said.
Mudavadi also warned that a rush of huge cash transactions was imminent and asked Kenyans to be careful of people seeking to purchase their properties in cash.
“If they extend it, then they are giving room to the fellows who have illicit cash in their godowns, mattresses more time to bring it out,” he said.
Consumer Federation of Kenya Secretary General Stephen Mutoro alleged the real culprits in the money laundering are banks and the corrupt, not ordinary citizens.
“This big money is already in the banks in safes. It just takes seconds to change it from old to new currency. The politicians who have unaccounted money have many proxies. They will just give each a reasonable amount to change without raising suspicion,” said Mutoro.
[Report by Rawlings Otieno, Moses Nyamori, Protus Onyango and Moses Michira]
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