Shrewd businessmen have resorted to splitting bulk payments through cheques to avoid scrutiny under the new Central Bank of Kenya (CBK) rules.
This has led to the first drop in seven years of the value of electronic payments made through real-time bank transfers.
The cash sent through the Kenya Electronic Payment and Settlement System (KEPSS) slumped by a tenth to Sh26.69 trillion in 2016 compared to Sh29.6 trillion a year earlier, according to latest CBK data.
Banking experts attribute the drop to businessmen shunning the platform after CBK governor Patrick Njoroge directed all payments above $10,000 (Sh1 million) to be moved through real-time gross settlement (RTGS) to arrest money laundering after the Sh2 billion NYS scandal.
“Are people splitting amounts so that multiple cheques are issued to avoid RTGS? Clearly, a decline in RTGS volumes as you have pointed out, should raise a lot of questions,” said a senior executive at a mid-sized bank, who declined to be named citing sensitivity of the matter.
Cheques have been capped at under Sh1,000,000.
From January 2016 all financial institutions were to report to the Financial Reporting Centre (FRC) any suspicious or unusual transaction that may be linked to money laundering or financing of terrorism.
The directive coupled with the earlier cheque truncation was expected to force investors to use real-time bank transfers to make payments.
“You and I would expect that the wananchi at large, especially in Kenya, would adopt electronic payment platforms more and more,” said our source.
Nearly a dozen bank CEOs contacted to explain this puzzling drop in banks’ RTGS volumes declined to comment on the matter.
“I am not able to throw light on this one. I do not have accurate information,” said Dhiren Rana, chief executive at Middle East Bank.