Sh1 million fine for banks over poorly updated customer accounts

Kenya Bankers Association director, Nuru Mugambi at a past event. [Photo: Courtesy]

Commercial banks and other financial institutions are set to pay a fine of Sh1 million for poorly updated customer accounts.

The Finance Bill 2018 which was enacted recently, suggests that each individual accounts be registered and updated with a next of kin every year.

Section 31 of the Banking Act reads, ‘’A bank or financial institution licensed under this Act shall, in respect to all accounts operated at the institution, maintain a register containing particulars of the next kin of all customers operating such accounts and shall update this register on an annual basis.”

Banks and other financial institutions are now set to customize their conditions which will require customers to provide next of kin or heirs when opening accounts.

Kenya Bankers Association director, Nuru Mugambi said, ‘’We recognize and appreciate the intent of the section; however, through consultation with the industry, the legislators would have introduced a more effective policy.”

Mugambi said that for the betterment of the industry, there could have been a consultation with key stakeholders before coming up with the law.

According to lawyer Carol Musyoki through an opinion piece in a local daily, Musyoki states that the law hereby conflicts confidentiality of customers’ account information by banks and financial institutions with experts curious about its efficiency.

Carol believes that though some customer details can be given to investigation, tax and credit reference bureau, the law allows the customers not to provide details of next of kin.

Central Bank of Kenya report shows that total balance sheet for banks stood at Sh4.6 trillion as at March 2018 with that of Global Findex showing that 82 percent of adults were holding financial accounts with banks.