There’s much at stake in enforcing integrity of our financial system

Kenya is at a crossroads. Geographically, it sits almost perfectly between East and West and North and South, which makes for a natural trade and financial hub.

The country also has some of the most sophisticated financial infrastructure in Africa. Our laws and regulations and the quality of our people and their constant innovation, make us one of the most attractive investment destinations.

However, these advantages also make Kenya a prime target for criminals, money launderers and terrorists. They seek to take advantage of our attributes, using them to execute their reprehensible deeds.

The January 15 terrorist attack, in which 21 innocent people were killed, is a stark reminder of what can happen if we let down our guard. In undertaking grand corruption, the perpetrators seek to circumvent the laws and structures and move vast amounts of money through our financial system to enable their malevolent intent.

We should, therefore, tighten the implementation of these laws and strengthen the structures to make Kenya unattractive to criminals.

Kenya is a member of regional bodies affiliated to the Financial Action Task Force (FATF). The three-decade-old intergovernmental body sets global standards and promotes effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and related threats to the integrity of the international financial system.

Within this framework, Kenya passed the Proceeds of Crime and Anti-Money Laundering Act (Pocamla) in 2009 and put it into operation in 2010. This is one of the core pillars of our anti-money laundering and countering the financing of terrorism (AML/CFT) framework, which also has elements such as the Prevention of Terrorism Act and Regulations 2013.

The Central Bank of Kenya updates its guidelines and regulations to banks. For example, CBK reminded banks to confirm several details from customers transacting more than Sh1 million in cash. Most countries have similar requirements, and a similar threshold of $10,000.

As I recently told Parliament, more than 99 per cent of bank accounts in Kenya hold less than Sh1 million; so, the vast majority of customers do not even encounter this requirement. But even for those who do — in the course of buying and selling land or property, or a motor vehicle, for instance — most find the requirement easy to fulfil. The documentation actually provides an extra layer of protection, which customers say they value. CBK has been working with banks to innovate and simplify the process.

What if we were to do away with these requirements? As a core member of the global financial system, we would be announcing to the world that we are not interested in countering financial crimes. Worse, we would be seen as a haven for criminal networks.

Predictably, the rest of the world would disengage with Kenya and avoid dealing with our financial systems. Even simple transactions such as sending and receiving money from abroad, using a credit card or making international payments would be near-impossible. It would be almost impossible to pay for medical care or school and university fees outside Kenya.

Trade and financial flows would be greatly hampered. For the wider Kenyan economy, the consequences would be even severer. With the injection of corruption gains and other illicit funds, the economy would suffer a seizure. The effect would dwarf that of the Goldenberg scandal, with its record inflation and triple-digit decline in the value of the Kenya shilling.

We must not relent in the effort to safeguard our financial system from potential and actual attacks. Any legislative, legal or policy effort we make must be to strengthen, and not inadvertently weaken, the system we have worked so hard to build, and which has served Kenyans so well.

The alternatives are far too ghastly to contemplate.

Dr Njoroge is the Governor of the Central Bank of Kenya.