Central Bank of Kenya warns banks of opening accounts for fake SACCOs

Banks and other financial institutions have been warned against opening accounts for dubious pyramid scheme businesses operating as SACCOs. Central Bank of Kenya (CBK) in a circular issued late last month urged banks to ensure they scrutinise transactions where non-deposit taking SACCOs mobilise huge sums from unsuspecting Kenyans. “This circular is to caution financial institutions against dealing with or offering any services to any unlicensed entities undertaking activities involving mobilisation of funds from the public,” wrote Director of Bank Supervision at CBK Gerald Nyaoma. There has been a rise in businesses duping Kenyans to save and buy land or stagger payments for off-plan houses only to close shop and take off with their money. 

For instance, Ekeza Sacco and Gakuyo Real Estate Ltd are said to have lured over 7,000 Kenyans eager to buy homes or own land before making away with over Sh3 billion. Another firm, Simple Homes used a pay-rent, own-home model, where several people were asked to register using Sh2,500 then save 25 per cent of the value of the property they wanted to buy, only for the orchestrators to close shop and vanish with their money. This prompted a joint notice to the public by CBK and Sacco Societies Regulatory Authority (SASRA) in April, warning that unlicensed deposit-taking entities and pyramid schemes had made a big comeback. 

The regulator now wants to clamp down on banks and micro-finance institutions that help channel money to the fraudsters. CBK said banks must establish who owns each account, ask for details about how the business operates, conduct ongoing due diligence and monitor transactions of the non-deposit taking SACCOs. 

Source: www.standardmedia.co.ke