President William Ruto wants the Central Bank of Kenya (CBK) to relax the rules for reporting transactions beyond Sh1 million.
The CBK has been hesitant to the implement a similar order given by retired President Uhuru Kenyatta citing money laundering concerns and breach of international obligations.
Chapter 231 of the Constitution that says the CBK “shall not be under the direction or control of any person or authority in the exercise of its powers or the performance of its functions.”
But President Ruto now wants the CBK to implement the order without further delay citing ongoing hindrances to small businesses.
“In our engagements, traders also complained about the onerous burden involved in cash transactions exceeding Sh1million,” said Ruto Tuesday, adding that many traders have reverted to storing money under their mattresses at great risk, which is clearly not the intention of the anti-money laundering regulations.
“While we remain fully committed to mitigating this risk, we believe that there is scope to make compliance less burdensome on genuine business transactions,” he said.
“I have been assured by the Central Bank that work on how to ease this burden without compromising the security of the financial system is underway.”
Retired President Kenyatta last October issued a directive to raise the limit of suspicious cash transactions commercial lenders are required to report under anti-money laundering laws to facilitate cash deals among traders.
Uhuru had ordered the immediate raise of the reporting limit for both deposits and withdrawals above the current Sh1 million, without saying what the new figure will be.
Lenders earlier said they were waiting for the CBK’s nod to raise the threshold for reporting transactions beyond the Sh1 million.
Uhuru had also said last year that a higher cash transaction limit “will facilitate easy transactions for micro, small and medium enterprises and help the economy respond to Covid shocks.”
He had noted that “cash remains an important payments channel for medium, small and micro enterprises, representing 80 percent of all their transactions.”
The law mandates financial institutions to keep records of cash transactions of more than Sh1 million and report suspicious deals to the FRC.
Insiders say banks would benefit from the increase in the threshold for reporting but the regulator is hesitant as it would breach some international obligations.
The CBK issued a circular in 2016 reminding banks not to relent on the prudential disclosures. Business people have complained that the cash limit has hindered their ability to carry out smooth transactions.
CBK Governor Patrick Njoroge had said in his last update in December that the review was “being dealt with in the central bank” and that he had to make a good judgment based on several concerns.