The Central Bank of Kenya (CBK) has issued a stern warning to the public about the surge in illegal money transfer services, including traditional methods like "hawala". These unregulated services operate without licenses under the National Payment System Act, 2011 and Money Remittance Regulations, 2013, and are increasingly being utilized by Kenyans living abroad due to lower costs and concerns over money laundering.
This trend has led to a significant Sh2 billion drop in official remittance figures for September alone. The CBK highlighted that consumers using these services do not have legal protection and could stand to lose their money if the providers default. Legitimate entities, on the other hand, prominently display their CBK license in their premises.
High transaction charges on remittances have been identified as a likely reason for the growth of these informal channels. On average, it costs $11.14 to wire $199.90 from the US to Kenya, according to data from the World Bank.
In addition to issuing this warning, the CBK is also seeking public assistance in identifying and reporting these unlicensed entities. This collaborative effort will facilitate the prosecution of violators and help curb the rise of illegal fund transfers. The CBK has emphasized that it will prosecute violators who use systems like Hawala, which operates without promissory notes, stating that this is a criminal offense with potential losses due to the lack of legal safeguards.
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