Kenyan banks to spy on customers’ large transactions under new rules

Kenyan commercial and microfinance banks will track large cash deposits and transfers following a directive by the Central Bank of Kenya (CBK) seeking to curb money laundering and terrorism financing.

Under the new guidelines, banks are required to adopt the use of Purpose of Payment (PoP) codes and inquire about additional beneficiary details for Real-Time Gross Settlement (RTGS) payments.

A PoP code is a classification system used in financial transactions to specify the reason or purpose for which a payment is being made.

It provides standardised categories that describe why a payment is being made.

Notably, if a valid code is not provided, a customer's payment may get rejected or delayed.

In a circular dated September 11, CBK said the proposed go-live date for the new guideline will be September 30, 2024, as per the revised plan.

CBK also says the pilot phase for the programme was rescheduled to between September 16-20, 2024 where participants are required to validate operational readiness, focusing on aligning technical interfaces and procedures with the new standards.

"Dress rehearsal phase will take place between September 23-26, 2024, incorporating a simulation of live operational conditions to confirm system readiness before the official launch," CBK said in a statement.

This follows the October 2023 directive when the central bank introduced the PoP transaction codes with the aim of fast-tracking local compliance with ISO 20022, which dictates transparent financial transaction processing.

The CBK didn't state a deadline for compliance, but the global deadline is at the end of 2025.

The migration is being undertaken as part of implementing the National Payment Strategy 2022-2025 and to modernise the National Payments System (NPS) to world-class standards.

CBK reiterates that the adoption of ISO 20022 messages will transform how financial messages are exchanged by enhancing operational efficiency and delivering richer usable data for analytics.

Since the publication of the ISO 20022 Standards in March 2023, a significant amount of effort has been undertaken by the financial institutions in the preparation and validation of ISO 20022 messages, CBK says.