Commercial banks have increased scrutiny on customer transactions as directed by the banking regulator to combat financial crimes, even as the country runs against time to clear the grey-listing tag.
This is after the Central Bank of Kenya (CBK) issued new guidelines including the introduction of Purpose of Payment (PoP) codes for Real Time Gross Settlement (RTGS) transactions.
"Dear customer, in line with the new CBK guidelines, we will be introducing the use of Purpose of Payment (PoP) codes and requiring additional beneficiary details for RTGS payments. We will notify you once the implementation date is confirmed," several people reported to have received the message from their respective banks.
Banks like NCBA, KCB, Equity and Co-operative Bank told the Star that they have been implementing the regulator's directive since early last month.
The PoP codes are intended to provide more transparency and efficiency by giving additional information about the reason for each payment, the bank explained.
Banks have been forced to add an extra field on their Internet banking platforms to capture the PoP codes.
For customers using application programming interfaces (APIs) or host-to-host integration, lenders are engaging with them in advance to ensure system compatibility.
The increased scrutiny is coming at the time Kenya is fighting to exit the Financial Action Task Force (FATF) grey list due to a lack of a clear strategy for prosecuting money-laundering offences.
The country was grey-listed on February 23, 2024, due to a lack of a clear strategy for prosecuting money laundering offences.
When FATF, an anti-money laundering watchdog grey lists a country, it means stricter monitoring by international financial institutions.
This may result in potential loss of investments, as foreign investors may be wary of doing business in a grey-listed country therefore discouraging investments crucial for economic growth.
The grey list contains countries whose AML/CFT laws do not match international standards, leaving loopholes for criminals to use the conventional financial system to launder money to finance terrorists.
Kenya was grey-listed due to a lack of a clear strategy for the prosecution of money laundering offences, inadequate investigations, or prosecutions of legal or natural persons for terrorist financing offences despite conducting several investigations.
Other reasons include a largely unregulated Non-Profit sector and weaknesses in regulation and oversight of the real estate sector and financial transactions made through legal firms.
Last month, the National Treasury said it had sought the support of the Gates Foundation for capacity support building targeted at financial regulators to get Kenya off grey-listing.
While handing over powers to the current office holder, John Mbadi, the immediate former cabinet secretary of National Treasury Njuguna Ndung'u told him to prioritise the initiative, saying Kenya's financial system is under great international scrutiny.
"I have been talking to the Gate's Foundation to help in capacity building of financial regulators, coordinated by the Financial Reporting Centre (FRC). With this support, Kenya will soon exit the list,'' Ndung'u said.
In June, FATF said Kenya was making progress on some recommended actions including amendments to its AML/CFT legislation to bring its framework in closer compliance with the FATF.
It said that the East African economic powerhouse had established a case management system to better manage its international cooperation requests.
This is after the country failed to seal loopholes that could have seen it exit the list in a review done in April.
