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Loan Apps Required to Reveal Funding Sources to Curb Money Laundering

Mobile loan apps
[PHOTO/ COURTESY]

Mobile loan apps will be required to reveal sources of their money to the Central Bank of Kenya. The move aims to curb claims of money laundering in the business.

Digital Credit Providers regulations gazetted by the Central Bank of Kenya (CBK) stipulate that the mobile money lenders should provide details of their investors and demonstrate that the monies are not being used to fund illegal activity

“A digital credit provider shall provide to the Bank the evidence and sources of funds invested or proposed to be invested in the digital credit business and demonstrate that the funds are not proceeds of crime,” the regulations say.

According to CBK Governor Patrick Njoroge, some unscrupulous dealers are using the loan apps to clean dirty money in the pretext of providing cheap and easily accessible loans.

Read: Data Commissioner Launches Investigations into Handling of Data by Mobile Loan Apps

Money laundering is the process of transferring and masking illegally obtained funds in order to make them appear legitimate. It is primarily employed by criminals and corrupt individuals to clean their money.

Previously, mobile lending apps were unregulated and provided a convenient money laundering medium. The lenders rely on investors who put billions into the businesses.

The new regulations come amid an increase in the number of digital lending apps. The lenders will now be required to follow all anti-money laundering regulations, which include flagging and reporting big and suspicious transactions to the Financial Reporting Centre. These transactions include cash in excess of Sh1 million.

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Written by Vanessa Murrey

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