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Central Bank of Kenya Governor Patrick Njoroge. [Wilberforce Okwiri, Standard]
After four months of demonetisation, the Central Bank of Kenya (CBK) has invited detectives to examine 3,172 suspicious deposits.

The Kenya Revenue Authority can also stake a claim to Sh60 billion in new deposits flagged during the exercise.

But the currency audit numbers tell only part of the narrative. The full story will unfold as individuals found to have made suspicious deposits begin their appointments with the Directorate of Criminal Investigations (DCI), the taxman and other investigative agencies.

It is a story that is likely to expose the rot in the country’s financial system, which was expected from an exercise that President Uhuru Kenyatta’s Government believed was necessary to restore order in the banking industry.

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For the last four months to September, the CBK has been steadfast in its pursuit to unearth the dirty money, and it put out 15,000 advertisements.

Governor Patrick Njoroge yesterday said they had flagged 3,172 suspicious transactions whose value he did not reveal.

In his last press briefing on demonetisation, Dr Njoroge said condemned notes valued at Sh7.4 billion had been rendered worthless after their holders failed to beat the September 30 deadline to exchange them with new notes.

Although some journalists felt that the Sh7.4 billion figure was smaller than expected, the CBK governor said the demonetisation process had successfully met its twin objectives of curtailing illicit financial transactions as well as the proliferation of fake currency.

Curiously, the money that did not find its way back into the banking system was almost as much as the Sh7.7 billion that the country lost through the Goldenberg scandal in the 1990s.

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Njoroge said the lost cash could be part of the dirty money its holders had been unable to redeem.

He added that other investigative agencies - including the Ethics and Anti-Corruption Commission and Financial Reporting Centre - had crucial information pertinent to their mandate.

“There is good information that these agencies will continue to work on,” said Njoroge, adding that the fight against dirty cash did not end on September 30.

The Government also drew the taxman's attention to Sh60 billion that found its way into the formal banking system.

He said with the end of the exercise, KRA could now deal with tax matters more easily after the discovery of the new fortunes.

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The governor noted that with so much cash finding its way into the banks, more transactions were going to be cashless.

“The demonetisation process proceeded very well,” said Njoroge, noting that majority of the transactions were below Sh1 million.

This means that 99 per cent of the money that went into bank accounts was not subjected to the stringent anti-money laundering and counter-terrorism financing (AML/CFT) rules.

Deposits or withdrawals of less than Sh1 million are not subjected to additional scrutiny.

Reject deposits

But Njoroge insisted that at no point did banks fail to comply with the AML/CFT measures, saying some banks even rejected deposits.

He, however, did not give the number of times banks did this or the value of money that was rejected.

The governor conceded that there had also been a lot of work done on the counterfeit front following increased incidences of fake money circulating.  

He, however, acknowledged that a few transactions might have "slipped through filters" into the banking system.

When he announced the demonetisation process on May 1, Njoroge cited the need to combat illicit financial flows in the country and region, which had largely been perpetuated by the condemned notes.

During the demonetisation period, money flowed back into the financial system in billions of shillings, as Kenyans who had put their savings "under the mattress" opted to park their wealth in bank accounts.

Njoroge said people did not exchange the old currency for new notes and take the money back to their hiding holes.

By October 1, there were 149.7 million pieces of the new Sh1,000 notes, against 209 million pieces that were deposited in bank accounts, leaving a difference of 60 million pieces.

By June 1, when the demonetisation process began, there were 217 million pieces of the old Sh1,000 notes outside the banking system, representing 83.2 per cent of the total.

Unveiled with fanfare in 1994, the Sh1,000 notes bowed out of circulation with a tarnished reputation.

Njoroge noted that the old note was the "oil that kept the wheels of corruption, drug trafficking, tax evasion and other crimes rolling".  

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CBK Old Sh1000 notes New Currency New Money Patrick Njoroge Money
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