The Use of regulatory policies in the fight against money laundering in Kenya

Abstract

It was found necessary to undertake this study so as to bridge the knowledge gap on fighting Money Laundering in Kenya using Regulatory policies. Money laundering has been identified as a major impediment to development in most countries and financial institutions have been identified as the main transmission channel used by money launders. The objective of the study was to examine the Regulatory mechanisms that Kenya has adopted in dealing with Money Laundering and to suggest ways of enhancing the effectiveness of these mechanisms to serve as veritable models for other African states. Two research questions relating to the primary research objectives have been determined. The study focused on the nine Banks listed on the Nairobi Stock Exchange (See Appendix II). The study respondents were the Compliance Heads of the listed banks. In addition, the study has also included two telecommunication service providers that are licensed to undertake money transfer services. These are: - Safaricom and Zain. The study utilized a qualitative technique in the collection of secondary and primary data. A semi-structured questionnaire (having both open and closed questions) was used in collecting data. The information was presented and discussed as per the objectives and research questions of the study. The seven Propositions that had been formulated were confirmed by a majority of the respondents. Findings of the study indicates that majority of the Financial Institutions have adopted the main core principles of the Financial Action Task Force (FATF) 40 recommendations. The factors influencing adoption of money laundering practices in Kenya was identified mainly as the respective organisations corporate governance policies (Ethical practices). Results further suggests that the challenges faced in implementation of money laundering regulatory policies among financial institutions in Kenya are mainly: Structural Displacement factors (i.e. cash based economy, lack of cooperation by countries due to different legal systems, Inadequate resources to control porous borders and corruption); Legal and institutional framework challenges and to some extent the Perceived Cost of implementing an AML regime.