Financial institutions, such as banks and fintechs. are gearing up to comply with a set of regulations called the Common Reporting Standards (CRS), which were published by the Attorney General on February last year in the Kenya Gazette.
- The regulations were developed from the baseline of the Organization for Economic Cooperation and Development (OECD) Common Reporting Standard which provides guidelines for global financial institutions to exchange account information across jurisdictions as a way to tackle tax evasion and money laundering.
- Several African countries have embraced the CRS provisions including South Africa, Mauritius, and Nigeria in concerted efforts to strengthen their financial systems.
- According to the National Treasury, compliance with these standards will enable the government to detect individuals owning wealth or income in offshore accounts every year and stem illicit financial flows.
“Each Reporting Financial Institution must report to the Commissioner the following information with respect to each reportable account of such Reporting Financial Institution. The Name, address, jurisdiction, residence, tax identification number (TIN) and date and place of birth of each reportable person that is an account holder of the account,” the CRS states.
“In the case of any custodial account, the total gross amount of dividends, the total gross amount of the other income generated with respect to the assets held in the account,” the guidelines continue.
Financial institutions will also report the account balance of their foreign customers and the total gross amount of interest paid in the case of a depository account. This information is expected to be filed on or before 31st May every year.
“Reporting Financial Institutions shall keep records that the institution obtains or creates for the purpose of complying with these regulations, including self-certifications, the steps taken in identifying the Reportable Accounts and records of Documentary Evidence maintained either in electronic form or paper based,” the gazetted standards said.
Banks are also mandated to retain those records for at least 5 years. They are also mandated to report changes in basic information for account holders such as mail addresses and residences.
The CRS is intended to target High Value Accounts, seeking to review their transactions and periodical values. The move will see lenders assist the government in reigning in financial crime, hoping to leap from the scrutiny of international watchdogs.
In February this year, the Financial Action Task Force (FATF) grey listed Kenya after it determined the country’s institutions had deficient bulwarks against money laundering and terrorism funding. The report was a warning to investors, requesting them to exercise caution in dealing with Kenya due to its weak financial oversight.
The grey listing prompted the National Treasury to enact legislation that will push Kenya out of the damning position. Financial institutions are at the center of these efforts because they are involved heavily in cross-jurisdictional transactions.
