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Introduction
In recent years, Kenya has witnessed a surge in the popularity of digital lending platforms. However, the rise of digital lending has also posed new challenges in the fight against money laundering and the financing of terrorism. Recognizing these challenges, the Central Bank of Kenya (CBK) has been proactive in establishing and enforcing Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) regulations for digital lenders.
The Central Bank of Kenya (Digital Credit Providers) Regulations, 2022, stipulates that an anti-money laundering policy must be in place before applying for a license to operate as a digital credit provider in Kenya.
AML/CFT Regulatory Requirements
Under the Central Bank of Kenya’s oversight, digital lenders are required to adopt comprehensive AML/CFT policies that align with national and international standards.
These include:
1. Customer Due Diligence (CDD)
Digital lenders must establish and maintain effective customer due diligence processes. This involves verifying the identity of their customers, understanding the nature of their financial activities, and assessing ML/FT risks associated with their transactions.
2. Suspicious Transaction Monitoring
Continuous monitoring of transactions is essential to identify suspicious patterns that may indicate money laundering or terrorism financing.
3. Reporting Obligations
The Act mandates digital lenders to report suspicious transactions to the Financial Reporting Centre (FRC) without delay. This includes any transactions that they suspect may be related to ML/FT.
4. Record-Keeping
Digital lenders are required to keep detailed records of all customer transactions and identification documents for a period specified by law. These records must be readily available for inspection by regulatory authorities.
5. Employee Training and Compliance Programs
Implementing effective AML/CFT measures requires knowledgeable staff. Consequently, digital lenders must provide regular training for their employees on AML/CFT compliance and maintain an internal policy to ensure adherence to regulatory requirements.
Conclusion
As the digital lending space continues to evolve, adherence to these regulations will not only mitigate ML/FT risks but also promote growth in the sector. For digital lenders, navigating these regulations requires compliance.
The commercial team at CM Advocates LLP possesses extensive expertise in the regulatory framework governing digital credit providers, including the drafting of anti-money laundering policies and other related policies.
If you would like to consult on this article or any other legal issue, you may contact Maureen Odongo at modongo@cmad or the commercial team through commercial@cmadvocates.com.
You can also visit our website https://cmadvocates.com/en for more information about us and our services.