It is in banks’ interest for large cash transactions limit to go up, so why are they opposing it?

large transactions

The government of Kenya through the Cabinet has proposed to amend the law that regulates large cash transactions in the country. The amendment seeks to increase the threshold for reporting such transactions from $10,000 (Sh1.41 million) to $15,000 (Sh2.1 million). This means that bank customers will not have to disclose the source, intended use and beneficiaries of their cash transactions below $15,000 to the Financial Reporting Centre (FRC).

This move has been met with opposition from the Kenya Bankers Association (KBA), which argues that raising the threshold will create loopholes for money laundering and terrorism financing in Kenya. The KBA claims that Kenya’s geopolitical location in the Horn of Africa makes it vulnerable to such risks, and that increasing the volatility of the exchange rate and inflation rate also warrant keeping the threshold at $10,000.

However, these arguments are not convincing enough to justify the status quo. In fact, there are several benefits of raising the threshold for large cash transactions that outweigh the potential drawbacks. Here are some of them:

  • Raising the threshold will reduce the administrative burden and cost for both banks and customers. Reporting large cash transactions involves filling out forms, verifying information, submitting reports and keeping records. These processes consume time and resources that could be better spent on other productive activities. By increasing the threshold, fewer transactions will require reporting, thus saving time and money for both parties.
  • Raising the threshold will enhance customer privacy and convenience. Some customers may have legitimate reasons to make large cash transactions, such as buying property, paying for medical expenses or sending remittances. The trouble of disclosing transactions less than shs 5 million doesn’t appear to be worth it. Many bank customers find it cumbersome or embarrassing to explain their transactions to bank staff or authorities. By increasing the threshold, more customers will be able to make large cash transactions hence catalyzing the countries economic activities.
  • Raising the threshold will not necessarily increase money laundering and terrorism financing in Kenya. The Cabinet must have sat down with key security personnel and experts and determined that there are no potential threats posed by raising the transaction limit from shs 1 million to shs 2 million. If fact, there are measures that can effectively combat money laundering and terrorism financing, such as enhancing risk-based supervision, improving inter-agency cooperation, strengthening anti-money laundering and counter-terrorism financing laws and regulations, and implementing international standards and best practices. Actually, raising the threshold will not prevent banks from reporting suspicious transactions regardless of their amount, as required by law.

Therefore, it is clear that raising the threshold for large cash transactions is a sensible and beneficial decision for Kenya. It will reduce unnecessary bureaucracy and cost, improve customer satisfaction and privacy, and not compromise national security or integrity. The Cabinet should be commended for approving this amendment, and the Parliament should pass it without delay.

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