Kenya clamps down on Cash

From my Twitter timeline, I can tell there is a lot written about the ongoing war on cash; an international war on physical paper and coins. Today, it was much closer to home.

Central Bank’s new tough rules to monitor large cash transactions was an article from the Standard Digital dated January 28, 2016

“Central Bank of Kenya (CBK) guidelines [. . .] are meant to increase traceability of bank transactions by encouraging those undertaking huge transactions to use electronic means.”

 Miles from Nairobi, in Europe, Norways Biggest Bank called for a ban on cash this week. Tyler Durden (from the linked article) goes on to explain what the ‘War on cash‘ means

It means governments are limiting the use of cash and a variety of official-mouthpiece economists are calling for the outright abolition of cash. Authorities are both restricting the amount of cash that can be withdrawn from banks, and limiting what can be purchased with cash.

These limits are broadly called “capital controls.”

I have written about how this transition affects you and I, and why it matters. In Why Bitcoin Matters, I blogged on why Bitcoin (and other non-confiscatable assets) have a role to play in a world full of government issued electronic money, where cash is illegal.

It is by no means a modern invention, as Martin Armstrong puts it in What Happens to Cash when Government Go Electronic, rather a typical political response by states to a depleted arsenal of monetary policy tools. He traces a similar event in (98-117AD) by The Roman Emperor Trajan.

So today, a friend of mine received this message from a commercial bank in Kenya, Chase Bank:

Dear Valued Customer,

We hereby wish to inform you of the new guidelines issued by Central Bank of Kenya (CBK) for additional information to be provided by customers when handling large cash transactions.

With immediate effect, customers conducting over the counter cash deposits or withdrawals equal to or exceeding USD 10,000 or its equivalent in any currency will be required to provide the following mandatory details:

1. Why is the large cash deposit or withdrawal necessary?
2. Why can’t the cash deposit or withdrawal be made through electronic means?
3. Where will the money be taken after it leaves the bank premises?
4. What is the money going to be used for?
5. Who will be the direct and indirect beneficiaries of the money?
6. What is the full identity of the intended beneficiaries of the money?
7. What is the source of the money being deposited or withdrawn over the counter?

In compliance with CBK regulatory requirement, these customer details will be captured via a declaration form available at all our branch outlets.

The new regulations are designed to encourage the use of electronic payments and reduce the inherent risks involved with cash transactions.

We encourage you to make use of the following alternate payment solutions offered at Chase Bank (K) Ltd:
• Electronic Funds Transfers (EFTs)
• Real Time Gross Settlement (RTGS)
• Mobile payments via Mfukoni
• Online Banking
• Cross border funds transfers
• Cheques (Banker’s cheques and personal cheques

I should be clear, I am not in favor of money laundering, evasion of taxes or terrorist funding – reasons stated by the Central Bank of Kenya for these raft of new measures. My concern is the far reaching implications of such a move on our privacy (of money) and the systemic risk on electronic funds held by third parties; assets which we have no direct control over. I am not the only one.

Speaking to the Standard newspaper, Johnson Nderi, an investment banker in Nairobi, “also wondered if the privacy rights of customers were being violated with such a rule.”
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Comments

  1. By the way, what do Kenyan laws say about privacy on the internet and digital platforms anyway?

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