The Central Bank of Kenya has instructed all financial institutions to obtain written statements from its customers confirming the nature of their business activities when handling large cash transactions equivalent to or exceeding Sh1 million or US$ 10,000 or its equivalent.
The directive is contained in a circular from the bank's supervision department to all chief executives of commercial banks, microfinanace and mortgage finance companies.
The statement noted that cash payment still remains the common means of settling transactions, however, in the recent past, great strides have been made in expanding the modes of making payments, including use of cards and electronic transfers.
Moreover, large cash transactions which are characterised by informality and anonymity, make the banking sector vulnerable to money laundering and terrorism financing.
It is for this reason that the regulator has provided additional prudential guidelines that asks institutions to obtain details of customers pertaining to why large cash deposits or withdrawals are necessary, why the cash deposit or withdrawal cannot be made through electronic means, where the money will be taken right from the bank premises, what the money will be used for, the direct and indirect beneficiary of the money, the full identity of the intended beneficiary of the money and lastly, the source of the money which is sought to be deposited or withdrawn over the counter.
The circular further warns that failure by a customer to comply, the institution should immediately file a suspicious transaction report with the financial reporting centre.