Absa Bank Kenya has been kicked out of foreign exchange trading for a week following violation of anti-money laundering regulations.
In a statement yesterday, financial sector regulator Central Bank of Kenya (CBK) said Absa, formerly Barclays Bank of Kenya, 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.
Under CBK anti-money laundering and terrorism finance regulations, banks have strict obligations to flag abnormal transactions by clients that could signal 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 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 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.
“During this time Absa Kenya cannot transact, inter alia, in the interbank foreign exchange market. However, all committed transactions as at April 8, 2020, can be settled,” said CBK.
In addition, the lender was expected to reverse the market positions created as a result of the flagged transactions and put in place adequate measures to ensure compliance.
CBK did not reveal the parties or the sum of money involved in the transactions but Absa said in its own subsequent statement that it carried out the trades on behalf of “highly reputable global financial institutions”.
“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. These were being executed on behalf of highly reputable global financial institutions, which are regulated in line with best international practice,” said Absa.
“The transactions were executed at prevailing market rates. The decision to cancel the transactions was taken to demonstrate our willingness to address fully the concerns of the regulator.”
The bank said it was in ongoing consultations and discussions with CBK to fully resolve all matters raised in the shortest possible time.
In the month of March, the Kenya Shilling fell to the lowest in five years as the market reacted to the news of local infections of the Covid-19 disease.
At the beginning of the month the Shilling exchanged at average 101.1 to the dollar, but has since weakened substantially to trade at 106.1 yesterday.