Commercial Banks in Kenya have raised issue with the government’s plan to increase the limit for them to report large cash transactions from Sh1.4 million to Sh2.2 million.

The banks argue that the move being fronted by the President William Ruto administration will pave way for increased cases of money laundering and financing of terrorism in Kenya.

This comes a month after cabinet approved changes to the draft Anti-Money Laundering and Combating of Terrorism Financing Laws (Amendment) Bill, 2023 to revise the threshold.

The revised law will shield bank customers from revealing to the Financial Reporting Centre (FRC) the source, planned use and recipients when transacting Sh2.2 million and below.

Kenya Bankers Association (KBA) told the National Assembly’s Finance and National Planning Committee that the move will be counterproductive given Kenya’s strategic location.

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Instead, KBA Compliance Committee Chairperson David Nyamato called on the government to retain the cash limits at $10,000 and not $15,000 or their equivalents in other currencies.

“Due to the increase in the volatility of the exchange rate as well as runaway inflation rates being experienced, the threshold of $10,000 should be retained and applied in a risk-based approach,” argued Nyamoto, who is also the NCBA Head of Governance, Regulatory Affairs & Stakeholder Relations.

Currently, customers are required by law to explain to banks the source of funds, intended uses and beneficiaries when transacting $10,000 and above for onward reporting to FRC.

“Kenya being the largest economy in the region, and its role as a transit hub for the Eastern Africa region, also poses a significant risk relating to illicit commerce,” warned Nyamato.

The committee session, which was chaired by the committee Vice Chairperson Benjamin Lang'at, was conducting public hearings on the proposed amendments to the law.

By law, the banks are required to report to the Financial Reporting Centre if they establish that such transactions made and the explanations offered are unsatisfactory or suspicious.

The KBA official told the committee that many countries, including Malaysia and those in the European Union (EU), have either stopped any review and revised limits downwards.

“Financial reporting systems is a global issue; It applies to all the financial sectors and we as a country must conform to the global requirements and standards,” he concluded.

If the changes fronted by the Ruto cabinet are adopted by MPs, FRC will have powers to outline circumstances in which a reporting institution’s license might be revoked.