The Central Bank of Kenya has declared old 1,000 shillings notes worth 7.4 billion shillings (about 71.29 million dollars) invalid due to failure of the owners to exchange them for new notes.
The bank governor Patrick Njoroge told a news conference in Nairobi that the invalid notes might have hit the suspected corrupt owners hard.
On June 1, the central bank set a Sept. 30 deadline for everyone to convert their old 1,000 shillings notes worth about 10 dollars to new ones after it became the banknote of choice for criminals of all types in the East African region.
People exchanging large amounts were required to explain how they acquired the cash. The move was designed to stop the flow of proceeds of crimes such as corruption and counterfeiting of bank notes through the financial sector.
According to Njoroge, the owners of the notes may have had some concerns in terms of going through the checks.
“The money (71.29 million dollars) is equivalent to a quarter of the annual budget of the government’s top hospitals in the country.
“It also marks the first time in the country that the corrupt have been made to lose a huge chunk of their wealth, with the biggest ever corruption fine handed out by the courts standing at 52 million shillings,” Njoroge said.
The central bank added that much of the cash appeared to have been gained in “the criminal area’’.
The East African nation has a diverse, fast-growing economy, but foreign investors have long complained of wide spread graft and weak application of anti-money laundering laws.
Commercial banks, which processed amounts up to five million shillings, flagged some 3,172 transactions as suspicious and reported them to the authorities during the conversion during the four months.
Njoroge said that the information will be used by other investigative agencies, including the tax authority to uncover more cases of handling of proceeds of crime.
“You have those that didn’t want to pay taxes and were working in the sort of criminal area. Those to begin with have just been taxed the full value of their wealth.
“Very large amounts above five million had to be converted at the central bank.
“The process of invalidating the old notes known as demonetisation had not resulted in inflationary pressure or weakening of the foreign exchange rate,’’ Njoroge said.
In 2016, India abruptly scrapped high-value currency notes, throwing its cash-based economy into a crisis.
Njoroge said Kenya had learned lessons from the chaos in India and that was why there was a four-month window.
Njoroge said the effort to stamp out corruption would be sustained.
“It cannot be that we glorify people who are involved in crime. It cannot be,” he said.