Experts reveal how abolishing the old Sh1000 bank notes will tame corruption and spur economic growth

Is this the end of corrupt officials, money launderers and those with ill-gotten money?

CBK Governor Patrick Njoroge presents the new generation notes to President Uhuru Kenyatta on 01 June 2019  during the Madaraka Day celebrations in Narok

Experts have opined that yesterday’s move by President Uhuru Kenyatta and Central Bank governor Patrick Njoroge marks the end of the road for corrupt cartels and criminal enterprises who have stashed millions of cash in their homes.

The move will disrupt illicit financial flows that have previously been exploited by Tax evaders, corrupt politicians, terrorist financiers and fraudulent businesspeople.

Stringent regulations made banks a no-go zone for criminal enterprises, money launderers and merchants of corruption, forcing them to keep the money in their homes or offices.

Recent raids by detectives have unearthed hundreds of millions of shillings whose source cannot be explained stashed in wardrobes, leaving many wondering why the owners opt to keep the cash home rather than in a bank where it is safer.

Case in point is late last year when DCI detectives reportedly found more than Sh700 million in the house of a personal assistant of a senior Jubilee party official during a secret raid though the matter never made it to court.

The new directive leaves them with no option but to get the millions back into the mainstream and legit financial system or end up stuck with billions of hidden shillings that will become valueless in just months.

Stringent regulations

Banking regulations require those making deposits of more than 1 million to account for the funds.

Analyst opine that a spending spree is set to commence in a bid to beat the deadline as money that would have otherwise remained idle in closets inside people’s homes will find its way into the mainstream financial system through bank deposits and investments leading to economic growth.

It is estimated that almost a third of Kenya's annual budget is lost through corruption.

The new directive,coupled with other measures that the government has put in place to fight runaway corruption will see the amount of money lost to corruption drop significantly. with most public funds being used for the intended purpose.

The next few four months could see huge deposits made in banks given that it is now a race against time to clean their money.

In anticipation of this move, CBK set up stringent anti-money laundering regulations that require one to account for funds when making withdrawals or deposits above Sh1 million.

For transactions of Sh10 million to Sh20 million or the equivalent, the approval of the regional branch manager or the senior manager is required.

A notice period of three days is required for people making over the counter transactions of more than Sh10 million, accompanied by supporting documents such as national identity cards/passport copies of the people involved in the transactions the purpose for withdrawing funds, the source of the money, the reason real-time gross settlement cannot be used.

Regulations further require the approval of the branch manager for cash transactions of Sh1 million to Sh10 million or the equivalent.

Secret operation

Experts opine that those that have been hiding money in their bedrooms, bunkers, and safes will have the hardest task of getting it to banks or legitimising it ahead of the 01 October 2019 when the older Ksh 1000 currently in use will cease to a legal tender.

Nation quoted well-placed sources at CBK stating that the whole process, including printing of the new Sh50, Sh100, Sh200, Sh500 and Sh 1000 notes was done in secret “serial litigious activists” from rushing to court to get injunctions, some on behalf of influential individuals.

That may explain why the new-generation notes were launched on 01 June 2019, a day after the same was gazette as legal tender.

“The new generation banknotes were issued yesterday, May 31, 2019, by a gazette notice. They are now legal tender,” Dr. Njoroge said.

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