Market regulator to tighten rules against money laundering

Market regulator to tighten rules against money laundering

Kenya’s capital markets regulator has published new regulations requiring stock and fixed-income brokers to report suspicious trades and transactions above $10,000 to a government body set up to fight money-laundering.

Kenya has the most active open capital market in East Africa and has gained broader appeal in Sub-Saharan Africa as other previously popular investment destinations, such as Nigeria and South Africa, have been battered by plunging commodity prices.

Paul Muthaura, the acting chief of the Capital Markets Authority (CMA), told Reuters the move to counter money-laundering is part of efforts to improve corporate governance and turn Nairobi into an international financial centre.

Muthaura also said the CMA was working with the Nairobi Securities Exchange to introduce trading of Exchange Traded Funds and derivatives, which could start in the first half of 2016.

Investors are cautious, complaining about widespread corruption in Kenya and saying regulation is not tight enough.

Muthaura said the CMA would penalise brokerages and investment banks that fail to comply, potentially removing their licenses.

He said tighter rules would encourage capital inflows to Kenya.

“It was not that we have identified money laundering and we must combat it … Kenya has an ambition towards becoming an international financial centre,” which demanded “certain minimum best practices”.

“The stronger our anti-money laundering laws, the more our markets become accessible for global capital flows,” Muthaura said.

Kenya has already progressed, in 2014, out of the “dark gray list” of the global Financial Action Task-force, where its financial system had been monitored closely because lax laws made it susceptible to money laundering.

The CMA also this month published a new code of corporate governance, demanding more regular and stringent reporting, Muthaura said.

The code seeks to limit the time independent directors can serve on a company’s board. “You cannot be an independent director for longer than nine years because after that period you are effectively an insider,” he said, adding executives would be exempted.

Analyst blame poor governance for losses at several Kenyan firms in recent years, including Mumias Sugar and Uchumi Supermarkets.

Muthaura said the CMA would act against individuals and firms found to have acted against the best interest of shareholders. “We are in the process of putting together the necessary information to support those actions,” he said.

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