Digital Lenders to Reveal Source of Funds in CBK’s Dirty Money War

Economy

Digital Lenders to Reveal Source of Funds in CBK’s Dirty Money War


Patrick Njoroge, Governor of the Central Bank of Kenya. PICTURES | NJAU SALATON | NMG

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Summary

  • CBK Governor Patrick Njoroge has repeatedly warned that digital lenders are offering platforms to clean up dirty money under the guise of providing cheap and easily accessible credit to Kenyans.
  • Money laundering is the transfer and disguise of illegally obtained money to make it appear legitimate, and is primarily used by criminals and the corrupt to cleanse their wealth.
  • Unlike banks and microfinance institutions, digital lenders do not take deposits which are in turn lent to borrowers.

Digital lenders will be required from September 18 to disclose the sources of their money to the Central Bank of Kenya (CBK) as part of measures to combat money laundering.

The requirement follows the official publication of the Central Bank of Kenya (Digital Credit Providers) regulations which require lenders to give details of their investors and also to prove that the funds are not intended to finance activities. criminals.

CBK Governor Patrick Njoroge has repeatedly warned that digital lenders are offering platforms to clean up dirty money under the guise of providing cheap and easily accessible credit to Kenyans.

Money laundering is the transfer and disguise of illegally obtained money to make it appear legitimate, and is primarily used by criminals and the corrupt to cleanse their wealth.

“A digital credit provider must provide the Bank with evidence and sources of funds invested or proposed to be invested in the digital credit business and demonstrate that the funds are not proceeds of crime,” the regulations state.

Unlike banks and microfinance institutions, digital lenders do not take deposits which are in turn lent to borrowers.

Digital lenders rely on investors who pump out billions of shillings to lend to borrowers.

Previously, digital lenders were not required by law to disclose the source of their funds, making them convenient platforms for cleaning up dirty money through dozens of unregulated micro-lenders, which have flooded the market to offer credit.

An increase in the number of lenders flooding the Kenyan market to meet the growing need for easy-to-access loans has prompted the CBK to warn of the need for strict anti-money laundering regulations for the sector.

Lenders will now be obligated to comply with all provisions of anti-money laundering laws which, among other things, include reporting and reporting large and suspicious transactions to the Financial Reporting Center (FRC).

These transactions include cash in excess of 1 million shillings as digital lenders join banks and microfinance institutions in reporting large value transactions.

The FRC and other state agencies like the Assets and Recovery Authority take action regarding the transaction if they believe the money is part of the proceeds of crime or is intended to facilitate the crime.

A violation of anti-money laundering laws results in a fine of up to 25 million shillings for financial institutions or a prison term of up to 14 years or a fine of 5 million shillings for those involved .

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