Inflation inevitable as criminals rush to clean up dirty money.
Tidying up the currency could also end up causing a shortfall of cash in circulation, the Institute of Certified Public Accountants of Kenya (ICPAK) warned in a statement."Experiences from other jurisdictions indicate that the intensity of demonetisation effects have mixed results.
At the initial stage, it might lead to a shortfall in cash in circulation, which will impact small businesses and households that mainly depend on cash transactions," said ICPAK, which, however, supported CBK's move to demonetise the old currency, saying the process will, in the long run, help curb corruption, tml" target="_blankterror financing, fraud, money laundering and counterfeiting. Consumers Federation of Kenya Secretary-General Stephen Mutoro said inflation is inevitable as people rush to spend loads of money, which would otherwise have been hoarded, within the four-month window.
"From all the experiments that have happened before, printing new currency has always resulted in a spike in inflation, and this will affect the cost of living," he said.He spoke as commercial banks said they had anticipated the transition and have in place the necessary mechanisms to receive the old notes and provide their customers with the new currency.
The Kenya Bankers Association (KBA), the industry lobby that speaks for banks, said the process will include reconfiguring automated teller machines and currency counters, and coordinating with CBK in Nairobi as well as at currency centres in Meru, Nyeri and Nakuru. There are approximately 1,700 ATMs, 780 bank branches, and 66,000 bank agents countrywide.
"We anticipate banks will have a structured replacement programme that will ensure minimal disruption of regular services," KBA spokesperson Nuru Mugambi said in a statement.The KBA also asked banks, bank agents and retailers, as well as citizens, to be especially vigilant during this period as there may be attempts to launder illicit funds through the banking system, "particularly for cash deposits in excess of Sh1 million".
With all the avenues of laundering the dirty money closed, criminals are likely to resort to spending sprees, and hence flood the market with the unwanted currency.At the Nairobi Securities Exchange (NSE), where the illicit cash could have been translated into shares, firms indicated that they would stop receiving cash for transactions.
SBG Securities Ltd, which buys shares on behalf of investors from the NSE, told its customers that it will no longer be accepting direct cash deposits into its accounts, as has been the case in the past, from July 1.Instead, customers will transact business through bank transfers, mobile money and cheques.
A customer care officer told the Nation on phone that the firm had resorted to changing policy to prevent it from falling victim to money launderers."We are advising our clients to use these channels and not to deposit the money directly to our accounts so that it is easy for us to trace the source of funds," the officer, whose identity the Nation is not revealing because he is not authorised to speak to the media, said on Tuesday.
Earlier Tuesday, SBG Securities, a subsidiary of Stanbic Holdings, had sent a text message to its customers communicating the change."From July 1, 2019, you shall not be able to fund your CDS account by directly depositing cash into our bank account," the short message read in part.
Currently, it is easy for money launderers to clean their ill-gotten wealth by buying shares and selling them later when the coast is clear.This has for a long time been viewed as one of the easiest ways to legitimise money at the stock exchange, since one can easily walk into a bank and deposit the money in the accounts of brokers to buy shares on one's behalf, then later ask the agents to sell the shares.
Forex bureaus in Nairobi said they had not witnessed any "unusual activities" due to the impeding removal of Sh1,000 notes from the economy. FOREX BUREAUSThere were no queues at counters yet and officials said it was too early to tell.
But they maintained that it will be hard for people with dirty money to exchange the it in bulk without raising eyebrows."So far, we have no alarm and we have no suspicious activities reported from our people.
You may check in two weeks," Mr Mohammed Nur Ali, chief executive officer of the Kenya Forex Bureaus Association (KFRA), told the Nation.The association, which represents over 100 forex bureaus, said its members support the move to demonetise the old currency and are ready to comply with the CBK directive.
Forex bureaus have been asked to expeditiously report any transactions above $10,000 (Sh1 million), as required by the law, to the Financial Reporting Centre. Mr Ali added that they will be on the lookout for suspects who break the money into smaller amounts and attempt to launder it by exchanging it for foreign currency.
"We had a meeting with the governor and he explained the procedures," said Mr Ali.Forex bureaus and international remittance dealers have only two sources of cash commercial banks, where they are also customers, and walk-in-walk-out customers.
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|Publication:||Daily Nation, Kenya (Nairobi, Kenya)|
|Date:||Jun 5, 2019|
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