CBK flags suspicious Sh1,000 notes in wheat purchases

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CBK flags suspicious Sh1,000 notes in wheat purchases

Wednesday, September 25, 2019 9:37

By BRIAN NGUGI

Kenyans with a huge stash of the old Sh1,000 notes are opting to buy commodities over exchanging the cash in banks for the new currency in a bid to conceal their identities.

The Central Bank of Kenya (CBK) Tuesday revealed a rush to buy agricultural commodities like wheat in Narok using the old notes ahead of the September 30 deadline set for their withdrawal.

The older versions of smaller denominations will remain in circulation alongside the new ones launched June 1, but after October 1, the older Sh1,000 notes would be invalid in changes initiated to tackle illicit financial flows and counterfeiting.

Sources at the CBK reckon that a significant number of people with dirty money have opted to buy commodities, especially agro-based products like wheat, encouraged by the farmers’ preference for cash-based transactions.

“Currently we have a problem in Narok. In Narok they are harvesting the wheat. And so we’ve seen an influx of purchasers who are purchasing wheat (in) cash,” Patrick Njoroge, the central bank governor told a media briefing yesterday.

“Let’s just say those transactions are quite a concern for us. I don’t want to say more but I think it’s important for you to know we are following things around the country.”

Official data indicated that more than 40 per cent of the Sh540 billion in circulation on June 1, when the old currency withdrawal notice was issued, were Sh1,000 notes. Its relative preference by Kenyans in transactions has also seen it favoured by those making fake currency and dealers hiding illicit cash outside the banking system.

Dr Njoroge yesterday said that 58 percent of the older notes returned to the banking sector in the three months to September were below Sh500,000, a pointer that people with huge amounts of dirty money ignored the system in their quest to dispose of the Sh1,000 notes.

“A lot of conversions are small. Small in value and small in number,” said Dr Njoroge. “The numbers are small, the values are small and also the pace has come down.”

Under the CBK rules, those seeking to exchange more than Sh5 million require the regulator’s approvals. A basic assessment will be done on source and ownership before authorisation is granted.

The central bank’s nod will also be required for those seeking to exchange at least Sh1 million and have no bank accounts.

“For between Sh1 to Sh5 million, you will need to go to your bank where they know you, your type of business and they will still ask the usual questions and you sign the usual declaration forms just like it has been done before,” Dr Njoroge said.

“Those who do not have bank accounts and want to exchange this amount will need to contact the CBK. We will then endorse them and they can go to a designated bank branch.”

This stringent rules could have discouraged those with illicit money from exchanging the old notes in banks.

The central bank has not quantified the volume of illicit flows but there has been enough evidence to force the authorities to act, the governor said.

Dozens of Kenyan government officials and business people have appeared in court since May 2018 on charges relating to the alleged theft of hundreds of millions of shillings from public coffers.