Absa Bank formerly Barclays Bank of Kenya has agreed to work with industry regulator Central Bank of Kenya to iron out issues that led to the suspension of its foreign exchange dealer license.
On Thursday CBK ordered the bank to stop foreign exchange dealing between April 9 and April 15 for failing to observe anti-money laundering rules on some trades.
CBK said Absa flouted several regulations in some forex trading conducted last month.
“The Central Bank of Kenya has taken regulatory action against Absa Bank Kenya (Absa Kenya), following Absa Kenya’s failure to provide information about some specific foreign exchange trades that it conducted in March 2020,” said the statement.
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Under CBK anti-money laundering and terrorism finance regulations, banks have strict obligations to flag abnormal transactions by clients that could signal a violation of the law.
Transfers, deposits and withdrawals of more than Sh999,999, for example, require clients to submit additional information to the bank. Other possible warning signs include the unexplained geographic distance between a customer and the commercial bank.
“In investigating these and other earlier transactions it is evident that Absa Kenya did not have the satisfactory assurance of the underlying commercial transactions supporting these trades, as is required, nor did the bank ensure the standard checks on anti-money laundering and combating the financing of terrorism (AML/CFT) and know-your-customer (KYC) requirements were applied,” CBK said.
The regulator ordered Absa Kenya to cease transactions on foreign exchange in the Kenyan market from April 9, 2020, to April 15, 2020.
The bank noted the action by the regulator and acknowledge receipt of official notice over the same.
Despite committing to work the regulator in resolving the matter within the shortest time possible it defended its system saying it complies to national and international regulations at all times.
“When the Central Bank of Kenya raised its concerns, pending resolution of the concerns raised, we decided to proactively cancel the two foreign exchange forward transactions concerned,” said a statement from Absa bank Kenya communication department.
“These were being executed on behalf of highly reputable global financial institutions, which are regulated in line with best international practice. The transactions were executed at prevailing market rates.”
The bank says that the decision to cancel the transactions was taken to demonstrate a willingness to address fully the concerns of the regulator.
“We are in ongoing consultations and discussions with the Central Bank of Kenya to fully resolve all matters raised in the shortest possible time. We remain committed to being a constructive participant in Kenya’s financial markets and to continue contributing to its further development in the interest of all customers and stakeholders.”
“Absa Kenya is required to ... reverse the market positions that were created as a result of the flagged transactions,” the central bank said in a statement.