The Central Bank of Kenya has intensified its efforts to combat illicit dollar trading, even as the shilling depreciated to a fresh all-time low against the US dollar.
On Monday CBK cautioned that unlicensed currency dealers are offering money or value transfer services in violation of its regulations.
"This is to inform members of the public that it is a criminal offence to provide money or value transfer services without a license or authorisation from the CBK."
"Such services do not enjoy the protection of the law and consumers stand to lose in case of any default by the providers of these services."
The CBK warning comes weeks after it imposed a cap on the amount of foreign exchange that forex bureaus can sell to customers, limiting it to a maximum of $100,000 (Sh15.1 million) per customer per day.
The cap by the CBK came at a time small and big businesses have turned to underground currency traders to fulfill their foreign exchange needs, The Standard has learned.
Illegal trades include buying or selling dollars without any record, and remittances through informal channels have been on the rise in recent weeks amid CBK strict monitoring of profiteers.
There has also been a rise in the popularity of the Hawala system, a traditional Somali method of money transfer that operates through a network of brokers known as hawalas, who facilitate money transfers for clients outside the conventional institutional framework.
Yesterday, CBK requested that individuals and organisations provide information regarding the identities and physical whereabouts of entities and individuals who are offering monetary or value services without proper licensing or authorisation from the CBK.
"This is to caution and, or warn members of the public against seeking money or value transfer services such as 'hawala' from unlicensed service providers."
"The CBK has a duty to identify entities and persons providing unlicensed or authorised money or value transfer services and to have them prosecuted in a court of law."
In the midst of the currency crisis in Kenya, the banking system is witnessing a surge in demand for US dollars.
Despite CBK’s strict penalties on forex market manipulation and a government-supported fuel import agreement, the local currency has continued to decline since the start of the year.
CBK Governor Kamau Thugge told the National Assembly Finance and National Planning Committee last week that the banking regulator has also written to 10 commercial banks seeking clarification on the significant disparity in their currency spreads despite the implementation of interbank market reforms.
The bid-ask spread (or the buy-sell spread) is the difference between the amount a dealer is willing to sell a currency for versus how much they will buy it for.
Dr Thugge said that CBK intends to going forward, “address any speculative activity on forex in the banking sector.”
According to CBK data, the Shilling reached a historic low Monday, exchanging at an average exchange rate of 151.1647 against the dollar.