CBK tightens noose on bank fraudsters

July 18, 2011

, NAIROBI, Kenya Jul 18 – The Central Bank is urging financial institutions to strengthen reporting mechanism on suspicious transactions that come through their outlets.

According to CBKs Director for Bank Supervision Rose Detho, lack of proper reporting of such incidents had opened a window for fraudulent activity to take place in the country.

Under the Proceeds of Crime and Anti Money Laundering Act, financial institutions are expected to report complex, unusually large transactions, or, any unusual pattern of transactions, with Mrs Detho saying the CBK had observed that the number of reported cases was low and some of the reports were not in the prescribed format.

According to a forensic report prepared by Deloitte Kenya, banking fraud is estimated to have tripled to Sh3 billion last year.  The report also cites the amount that banks were defrauded amounted to an average of Sh246 million a month, with almost half of the total amount lost during the year not recovered.

Mrs Detho said Central Bank had issued stringent guidelines that seek to compel financial institutions to report any suspicious transactions.

“A physical copy of the duly completed suspicious transaction form is to be submitted to the Bank Supervision Department of the Central Bank,” she said.

The Proceeds of Crime and Anti Money Laundering Act came into effect last year as a means to curb fraudulent activities. With it came the creation of the Anti-Money Laundering Advisory Board, which will deal with money laundering cases.

Currently, only institutions under the Banking Act have a minimal requirement to report suspicious transactions meant to prevent money-laundering activities.

Section 44 (2) of the Proceeds of Crime and Anti-Money Laundering Act, 2009 requires Reporting Institutions to monitor and report suspicious transaction reports to the Financial Reporting Centre (FRC).

The FRC is however yet to be established and the Central Bank will continue to handle fraud cases.

The CBK expects the institutions to file suspicious cases within seven days of the transactions, which also applies to incomplete transactions.

Mrs Detho also urged banks and other financial institutions to ensure they had adequate internal reporting mechanisms in place for employees to report suspicious transactions.

“All financial institutions should maintain internal reporting procedures which ensure that employees report suspicious activity to the Central Bank. They should designate an officer who will be responsible for relaying suspicious reports and outline procedures for reporting suspicious transactions to the designated officer,” she said.

The CBK has also stressed that under the Act, no legal proceedings may be brought against the institution or its employee for making a report in good faith in the course of disclosing a suspicious transaction.losing a suspicious transaction.


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