The impact of local legislation on money laundering: Case of Commercial Banks in Kenya
MetadataShow full item record
Money laundering and measures to combat it have become the focus of an intense international effort. Although the effects of money laundering on economic development as a whole are difficult to quantify, it is clear from available evidence that the activity damages the financial institutions, reduces productivity in the economy's real sector by encouraging crime and corruption, and can distort the economy's external sector. This paper seeks to evaluate the impact of local legislation on Money Laundering to the financial institutions in Kenya with the population of the study comprising all the forty-seven commercial banks. Simple random sampling technique was used to select 35 commercial banks. The study uses data from both primary and secondary sources. The primary data was obtained through a semi-structured questionnaire with both open and closed ended questions. Secondary sources of data include analysis and review of published books, journals, papers, periodicals, and unpublished works; Government documents including policy documents and Sessional Papers, media sources and the internet. This study uses both qualitative and quantitative methods of data analysis. Qualitative data was used for description of the situation of the study and its variations; while quantitative analysis used data to examine how many people and why they hold particular attitudes. The paper analyzes the position of Kenya in terms of financial institutions in controlling money laundering keeping up with the mandate of international forum. The last part analyzes the data collected on the basis of questionnaire survey and tries to find out the current initiatives and impact of local legislation on financial sector to combat money laundering. The study faced a problem of concealment of information by respondents. This was, however, overcome by providing anonymity and right to privacy of the research subjects as data is coded to protect the respondents' identities. The study found out that the local legislation had a significant impact on money laundering in Kenya. The local legislation has raised public awareness of the problem of money laundering; the provisions under the money laundering act have discouraged money laundering while the Act has impacted positively on combating money laundering activities to a great extent as indicated by harnessing or attracting resources for economic development and how much it has led to a better society with strong values. The Local legislation has further instilled public confidence in financial institutions thereby enhancing their stability. The Act has also strengthened sound banking practices that reduce financial risks to their operations. The amendment to the Banking Act, had the impact of empowering the countries' monetary authorities as well as commercial banks and other financial institutions to disclose information on 'suspicious transactions' by their clients as well as seize property or any economic advantage derived from money laundering activities. It can be concluded that sometimes financial systems are used as a route to transfer funds from one geographic location to another. Thus keeping in mind the trans-national character of the money laundering crime, there is need for a unitary and coherent approach at international level, to protect the global financial system from the money laundering. Further research may be conducted to identify the area and resources necessary for the developing countries to combat money laundering.