Safaricom tightens its grip on M-Pesa flows to curb dirty cash

A Safaricom subscriber transacting an Mpesa on the phone. [File, Standard] Kenya's biggest telco, Safaricom has tightened regulations on M-Pesa transactions with a view to crack down on fraud and money laundering. Safaricom announced that it will no longer allow its customers to transfer funds from M-Pesa to unregistered mobile money customers. According to the telco, only registered mobile money customers will have the ability to send and receive money through various mobile money service providers like Airtel and T-Kash (Telkom Kenya). Safaricom advised customers who have not yet registered for mobile money services to visit its shop or M-Pesa agent with their Identity Document (ID) card to register. "We encourage customers who are not registered for mobile money services to register by visiting a Safaricom shop or M-Pesa agent with their Identity Document (ID) card," said Safaricom. Earlier, Safaricom's money laundering reporting office wrote to its partner financial institutions including banks asking them to provide details of Know Your Customer (KYC) and anti-money laundering details. Future reference Financial institutions under the scope of the stringent rules will have to identify and verify people who carry out occasional M-Pesa transactions in their banking halls. The questions issued by Safaricom are aimed at confirming all its partner financial institutions comply with anti-money laundering guidelines. A sample question by Safaricom to banks include, "Does your institution keep a complete record of all transactions done with walk in customers together with customers' identification for future reference?" and "Does your institution keep a copy of all customers' identification documents in its file for future reference." Kenya faces an acid test on the status of reforms to strengthen anti-money laundering controls with the global dirty money watchdog expected to release its scorecard for the country. The country has been under pressure from the International Monetary Fund (IMF) to tighten its dirty cash monitoring rules. The Financial Action Task Force (FATF) could either place or exclude Kenya in an infamous grey list for its efforts or lack of in fighting money laundering and terrorist financing. Inclusion in a 'grey' watchlist by the Paris-based agency, could risk reputational damage to Kenya which is East Africa's largest economy and business hub. It may also hurt foreign investment. "Kenya faces risk of being grey-listed by the FATF, which could also adversely impact capital inflows," said the IMF in its recent programme progress notes on Kenya. The agency's regular reports and assessments usually group countries from the United States to China based on their responses to tackle financial crime. The assessments usually highlight a series of failings or successes, including lack of or adequate control of those who handle large sums of money. Broadly, the result of being added to the grey list is that it will increase the cost of doing business for local companies with foreign trading partners. For instance, a Kenyan multinational now doing business in European or US markets would have to provide detailed information on its activities to banks there and its procedures to mitigate possible money laundering and terrorist financing. The specific implications of this are that global correspondent banks and other intermediary financial institutions involved in transactions with Kenyan entities arek likely to demand a higher level of due diligence. The Ruto Cabinet last year in July approved a proposed law that seeks to raise the threshold for reporting large cash transactions by banks to Sh2.4 million ($15,000). The law required financial institutions to keep records of cash transactions of more than Sh1 million and report suspicious deals to the Financial Reporting Centre (FRC) - the agency operationalised in April 2012 and tasked with identifying and combating money laundering and financing of terrorism. Businesses and individuals transacting more than Sh1 million are required to declare to their bankers why the money cannot be deposited or withdrawn through electronic means under the Kenya Electronic Payments and Settlement System and Real-Time Gross Payment System (KEPSS/RTGS). The Ruto administration has been seeking to raise the limit ostensibly to allow cash-intensive businesses to easily access capital.

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