Challenges Of Implementing Effective Anti-Money Laundering Strategies In Kenyan Commercial Banks

Abstract

The aim of this study was to establish the challenges of implementing effective antimoney laundering strategies (AML) in Kenyan Commercial Banks. Descriptive design was adopted in this study. The population under study consisted of all licensed Commercial banks that were operating in Kenya as at 31 July 2019. The study was a census survey, covering 42 banks and 1 mortgage finance institution. Primary data was obtained through questionnaires. Data analysis was done using both descriptive statistics and inferential statistics in form of Factor Analysis. The study found that challenges of implementing effective AML strategies in Kenyan commercial banks include organisation cultures that did not prioritize compliance, inadequate focus on AML by senior executives and limited participation by relevant stakeholders in formulation and implementation of the AML strategies. Further, the study found that AML functions were not sufficiently resourced amidst rising costs of AML compliance. Another finding was that there is need to deploy intelligent technology for client identification and transaction monitoring was a challenge as technology changes happen rapidly and criminals often use the best technology for money laundering purposes. As banks have multiple products, processes, procedures and systems which are uniformly applied across segments, extensive AML risk interpretations, assessments, vigilance and expertise are necessary. Additionally, AML processes like periodic and adhoc review of client information are demanding given the number of customers, products and situations that bank customers may be in, hence, posing a challenge in effective implementation of the AML strategies. The study also found that globalization and innovations in the banking industry are a challenge as these allow for rapid movement of funds and trade within and across nations, providing fertile grounds for criminals to place, layer and integrate illegally acquired funds faster. Further, outdated client information and limited co-operation from clients in provision of KYC information poses a challenge in transaction monitoring and subsequently on effectiveness of AML strategies for banks. In addition, banks spend considerable amount of time, resources and effort to train employees, to keep up with changing regulations local and international regulations and ensure consistency in application of due diligence checks across the organization. The study recommends more involvement of senior executives on AML activities, use of updated intelligent systems and technologies that effectively monitor client activities from an AML perspective, employment and retaining of personnel with adequate knowledge and skills as well as more support and involvement by the government and Regulators in assisting banks to effectively implement their AML strategies.