The Central Bank of Kenya (CBK) Friday stopped Pan African lender Ecobank from foreign exchange trading, the country’s second such measure in two years, causing concern among other banks. Ecobank was ordered by the regulator to halt foreign exchange activities between March 29 and April 4 due to risky trading practices. “Ecobank did not have sufficiently adequate risk controls to prevent breaches on its foreign exchange exposure restrictions, or erroneous reporting of its position,” the central bank said in a statement, without specifying the amount of money involved in Ecobank’s problematic transactions.
Econbank was given until March 31 to rectify flaws in its foreign currency trading platform, according to the regulator. “The corrective plan should also point to specific actions to address the risky trading practices that led to non-compliance and to enforce adherence to orderly behavior as outlined in CBK’s foreign exchange standards,” according to the CBK. Banks have strong responsibilities under CBK anti-money laundering and terrorism funding legislation to flag unusual transactions by clients that could indicate a violation of the law. Clients who make transfers, deposits, or withdrawals totaling more than Sh999,999, for example, must provide additional information to the bank. An unexplained geographic gap between a customer and the commercial bank could also be a red flag.
Ecobank is the second bank to be barred from trading in the foreign exchange market since 2020, causing concern among other lenders. “Everyone in the forex market must immediately reassess their operations to prevent being caught on the wrong side of things,” a currency dealer from one of the banks told the Daily Nation. The CBK ordered rival Absa Bank Kenya to suspend foreign exchange dealing for a week, until April 15, 2020, for failing to follow anti-money-laundering guidelines on particular operations, and will forfeit earnings from the dealings.
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