Kenyan banks nightmare as they grapple with the reality that their popular local bank agents may soon be easy targets for money launders out to clean dirty money before October 1st

A local bank agent shop in Kenya. (techcabal)
  • Due to their convenient location found in almost every estate and far-flung areas where traditional banks were unheard off local banks agents have over the years become more and more popular in Kenya.
  • According to data from the Central Bank of Kenya, the value of transactions undertaken hit a record high of Sh1.07 trillion in 2017, up from Sh734 billion in 2016 and Sh152 billion in 2012, underlining its popularity.
  • As Kenya moves to withdraw the old version of its Sh 1,000 note by October 1st, it is feared the agents could become easy conduits for dealers hiding illicit cash outside the banking system.

In 2013, Kenya had just 23, 477 local bank agents, fast forward four years later and the country had 61, 290 agents as of the end of 2017.

Unlike the traditional banking hall where a teller is only available within the strict banking hours, bank agents even though they provide a limited range of financial services are far more flexible and hence one of the reasons for their popularity.

Due to their convenient location found in almost every estate and far-flung areas where traditional banks were unheard off local banks agents have over the years become more and more popular in Kenya.

According to data from the Central Bank of Kenya, the value of transactions undertaken hit a record high of Sh1.07 trillion in 2017, up from Sh734 billion ($7,34 billion) in 2016 and Sh152 billion ($1.52 billion) in 2012, underlining its popularity.

Commercial banks in Kenya in a bid to stay open in the face of the fierce competition decided to roll out the model and take their services to previously under-served segments, cutting costs by reducing the flow of people to their branches in the process.

Agency banking has since gained more traction in the country due to increased efficiency of the model.

The model, however, hasn’t come without its fair share of challenges. Some of the more than 60, 000 bank agents are suspected of being conduits of cleaning dirt money and have been placed on a watch- list by the bank’s regulator.

As Kenya moves to withdraw the old version of its Sh 1,000 note by October 1st, it is feared the agents could become easy conduits for dealers hiding illicit cash outside the banking system.

“We already have the necessary framework to check the inflow of such money but we are now being extra careful to ensure they are enforced without any slip-ups and without inconveniencing those making genuine transactions.” Kenya Banker Association (KBA) Chairman Habil Olaka warned on Wednesday.

Mr Olaka added that to deter the vice bankers have now installed a system to flag unusual transactions at the agencies, including huge daily trades and regular small deposits from a single person.

“Agents, for example, have limits and range of transactions and any strange upsurges will definitely be flagged and monitored. We just want to be extra vigilant to ensure that the system is not used to clean dirty money,” said Mr Olaka.

CBK Governor Dr Patrick Njoroge on Saturday said that older versions of smaller denominations will remain in circulation alongside the new ones, but after October 1, the older Sh1,000 note would be invalid.

“We have assessed the grave concern that our large banknotes, particularly the older one thousand shillings series, are being used for illicit financial flows in Kenya and also other countries in the region,” said Njoroge.

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