Kenya’s central bank has suspended ABSA Kenya from being an authorised foreign exchange dealer for a period of one week for failing to provide information on a transaction conducted in March 2020.
According to the CBK, “It is evident that ABSA Kenya did not have satisfactory assurance of the underlying commercial transactions supporting these trades as is required, nor did the bank ensure the standard checks on anti-money laundering and combating financial terrorism.”
Foreign exchange dealer. A firm or individual that buys foreign exchange from one party and then sells it to another party. In Kenya, authorised banks are licensed to buy, sell, borrow or lend in foreign currency or transact any other business involving foreign currency. Authorised dealers are also free to facilitate payments between Kenya residents and non-residents and engage in spot money market and derivative foreign exchange deals.
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The regulator has, therefore, told the lender to put in place a robust framework that ensures all relevant documents for such foreign exchange transactions are available as required.
During the period, CBK says ABSA Kenya will “Cease to transact as an authorized foreign exchange dealer in the Kenyan market from Thursday, April 9, 2020 to Wednesday, April 15, 2020. During this time ABSA Kenya cannot transact, inter alia, in the interbank foreign exchange market.”
However, all transactions committed as at April 8, 2020 can be settled.
The CBK emphasised that the objective of building sound, fair, transparent financial markets, anchored in the law and according to global best practices.
The announcement coincides with the ongoing purchase of a maximum $100 million every month between March and June to increase foreign reserves. which has resulted in increased dollar demand impacting the shilling’s nominal exchange rate.
“We expected a reduction in the demand of US dollars from significant savings made from oil importers. We, therefore, expected to build our reserves without destabilizing the market. Some dealers understood this. There also has been some indiscipline from malicious actors in the market,” said CBK Governor Patrick Njoroge post the MPC meeting held on 24 March.
The Kenya Shilling depreciated against the US Dollar by 3.3% in Q1’2020, to close at Kshs 104.7, from Kshs 101.3 at the end of Q4’2019. Currently, CBK’s forex reserves, are at USD 7.9 bn (equivalent to 4.8-months of import cover), above the statutory requirement of maintaining at least 4.0-months of import cover, and the EAC region’s convergence criteria of 4.5-months of import cover.
Absa Bank Kenya Defends Itself Over Anti-money Laundering Lapses
Analysts not taking it easy!
George Bodo, Director at Callstreet Research and Analytics LTD in a tweet observed that “The Central Bank of Kenya rarely publicly reprimands banks for market infractions..the Absa case must have been serious misconduct!”
Alego Usonga Member of Parliament Sam Atandi said the announcement was ‘alarmist’ in response to the CBK.
“CBK Governor is not a sensitive supervisor of monetary policy in Kenya. He has zero business tact. You don’t need to publicize simple daily administrative actions taken on banks. This is too alarmist,” Tweeted Atandi.
David Ndii, a leading Kenyan economist and public intellectual through his Twitter account, he says: “It is evident that ABSA Kenya did not have satisfactory assurance of the underlying commercial transactions supporting these trades, as is required”
Required by what law? This is not an Anti-Money Laundering (AML) violation, it is exchange control through the back door. Shame on you CBK Kenya.”
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