Central Bank of Kenya warns of rising illegal fund transfers

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The Central Bank of Kenya (CBK) has issued a strong caution to the public regarding the increasing prevalence of unauthorized money transfer services, including traditional methods like “hawala.”

These unregulated services operate without the required licenses under the National Payment System Act of 2011 and the Money Remittance Regulations of 2013. They are becoming more popular among Kenyan expatriates due to their lower costs and concerns related to money laundering.

This development has resulted in a substantial decrease of Sh2 billion in official remittance figures for September alone. The CBK has emphasized that consumers using these services lack legal protection and could risk losing their money if the providers fail to deliver. Conversely, legitimate entities prominently display their CBK licenses at their premises.

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The proliferation of these informal channels is partly attributed to high transaction fees on remittances. On average, it costs $11.14 to send $199.90 from the United States to Kenya, as per data from the World Bank.

In addition to issuing this warning, the CBK is soliciting the assistance of the public in identifying and reporting unlicensed entities. This collaborative effort will aid in the prosecution of those violating the law and help in curbing the rise of illicit fund transfers.

The CBK has stressed that it will pursue legal action against those who use systems like Hawala, which lack the necessary promissory notes, as this constitutes a criminal offense and leaves individuals vulnerable to financial losses due to the absence of legal safeguards.

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