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EDITORIAL: Seal security loophole in safe deposit boxes

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Barclays Bank of Kenya has taken the drastic decision to freeze new safe deposit box services following the reputation damage suffered from detectives raiding its Queensway House branch in Nairobi and finding currency estimated at Sh2 billion and 70 kilogrammes of gold, both believed to be fake.

While investigations continue and the case against six suspects proceeds in court, the discovery is a red flag on the dangers posed by the safe deposit box business. For starters, the service is in decline among banks globally as customers prefer to keep their valuables — jewellery, gold bars, coins, stamps, artefacts, works of art and important documents — with other independent providers.

Barclays and HSBC migrated their customers in the United Kingdom for the service to such entities last year. Banks are also shying away from the business because it consumes a lot of space and takes a while to break even. The Barclays incident, however, raises questions on the security of the safekeeping business.

Traditionally, the business thrives on secrecy, meaning customers are not required to disclose the contents in their assigned safes. Yet this is an imperative as Kenya moves with the world in fighting extremism and illicit financial flows that fund it. As evident from the Barclays case, explosives, chemicals with radioactive elements and other substances that jeopardise public safety can find their way into safe deposit boxes undetected. The most devastating terror attack in Kenya, the 1998 US embassy bombing, involved explosives being planted in the building.

Could scanners be the answer? Where banks still keep items in custody on behalf of customers, they do now allow cash, restrict the size of the safes as well as the number of times in a year that the vault can be opened. Only account holders, whom the banks can quickly trace should there be a breach, are eligible for the service. The contents have to be insured separately, including indemnity for custodians. Independent vault service providers have gone a step further, deploying the latest in technology to monitor activities on the safes as well as in self-regulation.

However, competition has seen some smaller entities compromise on know-your-customer (KYC) rules by allowing anonymous deposits while also offering increasingly larger boxes. In other cases, insiders have broken into the safes and taken off with the valuables of depositors or stolen items found a safe haven in the faults.

These are some of the reasons why the government ought to create regulations on safe custody boxes. Regulations should aim at safeguarding the country from potential risks while securing the interests of safe deposit box users and custodians.





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