Plans to raise the threshold for reporting large cash transactions by 50 per cent to $15,000 (Sh2.1 million) is a two-edged sword which will open a can of worms over the integrity of financial transactions.

Loosening the grip to scrutiny within the financial system, after President William Ruto’s Cabinet approved amendments to the law, gives customers the power not to disclose sources of revenue below Sh2.1 million.

What this means is that the new mandatory figure to be reported to the Financial Reporting Centre (FRC) increases from Sh1.41 million to Sh2.1 million.

In taking a stand against the proposed move, Kenya Bankers Association (KBA) is saying that increasing the reporting threshold for large cash transactions will stymie the “know your customer” principle, which emphasises understanding the backgrounds and intentions of clients.

They are cautioning against raising the threshold, leveraging the “know your customer” spirit which implies that banks have been diligent in scrutinising transactions and identifying potential red flags related to money laundering, fraud, and terrorism financing.

KBA’s opposition aligns with worries about potential risks associated with money laundering and terrorism financing. By maintaining a lower reporting threshold, banks can continue to closely monitor transactions, ensure compliance with regulations, and uphold the principles of financial transparency.

This could lead to a rise in informal or black-market transactions, which can have negative implications for tax collection and overall economic stability, saying it is bad for Kenya especially due to the country’s geopolitical location in the Horn of Africa.

Due to its closeness to Somalia, which is an Al-Shabaab stronghold, an increase in the threshold only serves to increase the threat of terrorist financing.

While the deal may unintentionally encourage legitimate businesses to conduct larger transactions in cash to avoid detection, it could also lead to a rise in informal or black-market transactions, which can have negative implications for tax collection and overall economic stability.