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Gichuki Edwin Mugo - PhD Student, Jomo Kenyatta University of Agriculture and Technology, Kenya

Dr. Gillian Mwaniki (PhD) - Lecturer, Kenya Methodist University, Kenya

Dr. Douglas Ogolla (PhD) - Lecturer, Kenya Methodist University, Kenya


The biggest source of foreign exchange for poor countries has been the remittances because the above-mentioned short calculations show that the remittances from the rich countries have emerged as an important source of foreign exchange for poor countries. Remittances were double the amount of foreign aid and ten times higher than the net private capital transfers in 2001 knowing that the net private capital transfers are the product after deducting all financial flows, such as interest payments and profit repatriation. The objective of this study was to find out the influence of money remittance regulations on the growth of financial sector on the Kenyan economy. The study used both primary and secondary data. Primary data was collected using semi-structured questionnaire having mostly close-ended questions and a few open-ended questions. The close-ended questions enabled the researcher to collect quantitative data for statistical analysis. Secondary data will be collected using relevant information from the financial records, CBK publications, newspaper among others.  The findings of the survey confirm that countries have taken different approaches to the regulation of hawala and other similar service providers, with a slight majority of countries treating hawalas and other similar service providers as illegal. Reporting (STR), Record keeping, Training, Compliance Officers, and Internal Controls Requirements. In particular, all these countries require compliance with CDD requirements. All except one country require STR reporting. All except two countries require training of staff on AML/CFT regulations and record keeping for a minimum of five years. The study concludes that As hawala and other similar service providers are treated the same as any other remittance companies for the purpose of AML/CFT obligations, sanctions applicable to hawala and other similar service providers for failure to implement AML/CFT requirements are general provisions that apply to all MVTS whether they are called remittance companies, money service providers, or payment institutions. The questionnaire did not specifically ask whether sanctions are the same for all the financial institutions including MVTS or not, but some countries impose the same range and scale of sanctions for all the financial institutions while others have different scale and range of sanctions depending on types of financial institutions (for example, there are differences between banks and MVTS). The study recommends that it is important that all types of money service businesses including regulated hawala and other similar service providers report promptly to the financial intelligence unit (FIU) or any relevant authority if they suspect or have reasonable grounds to suspect that funds are the proceeds of a criminal activity, or are related to terrorist financing or related to unlicensed money remittance business. The information collected by FIU through STRs can be used by law enforcement agencies (or by supervisors) to conduct further investigations which can help identify illegal hawala and other similar service providers. STRs can be very useful technique to track down flow of money especially when banks and other financial institutions are used as a medium of settlement.

Full Length Research (PDF Format)