Banks in Kenya will start monitoring instant large cash transfers following changes that will make it compulsory for customers to disclose the purpose of the transfer.
The lenders have re-calibrated their systems to provide for ‘purpose of payment’(PoP) transaction codes, meaning that it will now be mandatory for customers to use the drop-down menu, with options for their selection.
This will mark a departure from the current practice where customers making Real Time Gross Settlement (RTGS) payments are given the option to type in the purpose of payment. This has left banks with non-uniform data since customers key in different things.
Banks have started communicating this change to customers, in a move that looks set to accelerate local adoption of ISO 20022 standards, which require transparent processing of financial transactions.
The move is part of enhancing the fight against dirty money and also curbing graft in a n economy where the two vices remain a headache to the government.
For instance, Standard Chartered Bank of Kenya, which had in July issued this communication but later recalled it, has now issued a new notice, indicating that the changes will set in from this Monday October 14, 2024.
“Effective 14th October 2024, purpose of payment information will be required for all Real Time Gross Settlement (RTGS) payments made from the SC Mobile App and from our Online Banking platform.
This is in line with the industry requirement as stipulated by our regulator to enhance your payments experience,” said StanChart in email notices to customers.
The changes come days after banks and microfinance banks shifted to the upgraded system for messaging high value financial transactions to increase speed of transfers while heightening the screening for fraud.
Banks between September 16 and September 20 piloted the upgraded system which incorporates ISO20022 Standard—a global standard for exchanging electronic messages between financial institutions using uniform messaging and coding to give better insight into the purpose of every financial transaction.
The ISO 20022 standard provides nearly 10 times more data about each payment, including the purpose of payment, original source and ultimate beneficiary.
Such information allows banks and regulators to stem out fraud, money laundering and terrorism financing while setting transactions at enhanced speed.
The structured messaging format will also help banks understand the underlying relationship between all parties in the payment chain, eliminating chances of unnecessarily flagging and delaying safe transactions.
The Central Bank of Kenya directed banks to migrate the Kenya Electronic Payment and Settlement System (KEPSS)—Kenya’s payment system for high-value and time-critical domestic payments—to ISO 20022.
“The adoption of ISO 20022 messages will transform how financial messages are exchanged by enhancing operation efficiency and delivering richer usable data for analytics,” said Michael Eganza, CBK director of banking and payment services, in the circular issued to banks on September 11.
The pilot phase was followed by a dress rehearsal phase in which a simulation of live operations was carried out for four days to September 26.
Banks then went live with an ISO 20022-compliant system on September 30. All financial institutions involved in cross-border payments have up to November 2025 to switch to this new standard that intends to create a single common language for payments.
The migration to the new standard is part of implementing the National Payment Strategy 2022-2025, in which the CBK aims at, among other things, enhancing reporting of fraud incidents through robust data reporting.
