Kenya’s Central Bank Issues Warning on Increasing Illegal Fund Transfers

The Central Bank of Kenya (CBK) has issued a strong warning regarding the rise of illegal money transfer services, including traditional methods such as "hawala." These unregulated services operate without the necessary licenses required by the National Payment System Act of 2011 and the Money Remittance Regulations of 2013. As a result, they are being increasingly relied upon by Kenyans living abroad due to their lower costs and concerns regarding money laundering.

This situation has contributed to a significant reduction of Sh2 billion in official remittance figures for the month of September alone. The CBK emphasized that customers using these unauthorized services lack legal protection and risk losing their money if the service providers fail to deliver. In contrast, legitimate money transfer firms display their CBK licenses prominently at their locations.

High transaction fees associated with remittances are believed to be a contributing factor to the growth of these informal channels. On average, sending $199.90 from the US to Kenya incurs a cost of $11.14, as reported by the World Bank.

In light of this issue, the CBK is calling on the public to assist in identifying and reporting these unlicensed entities. This collaborative approach is aimed at facilitating the prosecution of offenders and reducing the prevalence of illegal fund transfers. The CBK has made it clear that it will take legal action against perpetrators who use systems like hawala, which operates without promissory notes, as these practices constitute a criminal offense that poses risks due to the absence of legal protections.

This article was generated with the support of AI and reviewed by an editor.