Anyone holding the old Sh1,000 bank notes outside the country will have to bring them back to exchange with the new currency before the October 1 deadline, Central Bank of Kenya (CBK) Governor Patrick Njoroge has said.
Dr Njoroge Thursday ruled out allowing any form of conversion of the old notes outside Kenya’s borders, indicating that the regulator had notified all foreign banks to stop recognising the legacy currency.
The CBK boss said the regulator is also not providing any new generation bank notes to lenders outside the country to facilitate conversion, arguing that this would defeat the goal of combating illicit money flows that have informed the move to demonetise the old Sh,1000 currency.
“If you have the Kenyan currency and you happen to be outside the country, there is only one way to get value for it before October 1. You have to take a trip here and go through the procedures outlined in the gazette notice and subsequent releases,” said Dr Njoroge at a press briefing yesterday.
“You cannot convert it to any other currency out there, since this would defeat the process of demonetisation.”
Both the Bank of Uganda and the Bank of Tanzania issued notices earlier this month freezing the conversion of the old Kenyan notes in their banks. They have also advised their countries’ banks to subject all flows to higher due diligence processes.
Those coming into the country to convert their notes will follow the same procedures laid out for locals.
Converting between Sh1 million and Sh5 million is happening at all commercial bank branches, where customers are expected to make declarations on the source of their cash.
Persons exchanging more than Sh5 million will need to get an endorsement from CBK, as will those exchanging more than Sh1 million but do not have bank accounts.
Dr Njoroge added that the net has been cast wider to forestall efforts to clean dirty money in other jurisdictions that carry out significant financial transactions with Kenya.
The Kenyan shilling is commonly used to transact goods and services in neighbouring countries, especially now that East African Community rules allow free movement of people and goods across regional borders.
The shillings find their way back home through the same trade routes, as well as official currency repatriation mechanisms between the central banks of the respective countries in the bloc.
Dr Njoroge also ruled out making an extension to the October 1 deadline for the demonetisation process, saying that doing so would provide those looking to get rid of illicit funds a loophole to do so.
In his briefing yesterday, the governor also sought to allay emerging fears over the alleged counterfeiting of the new bank notes, revealing more details of their security features and the design process.
Kenyans on social media had earlier this week discussed the Kiswahili name of CBK (Banki Kuu ya Kenya) on the new notes, noting the difference in spelling with the Tanzanian currency which carries the bank’s name Benki.
Dr Njoroge said that the CBK’s name has been spelt this way from its establishment in 1966, having been agreed upon by a small working committee of the first CBK governor Dr Leon Baranski, the then Treasury PS the late John Michuki and the late Tom Mboya, who was minister of economic planning.
Dr Njoroge said that the original recommendation to Mr Michuki was “Banki ya Katikati ya Kenya”.
Upon realising that the literal translation would not work, Mr Michuki brought the issue to the attention of Mr Mboya, who coined the current name.
They also discussed the name Banki and Benki, but given that the word was borrowed from English and modified, they decided they could settle on either and chose Banki.
Dr Njoroge said CBK had explored the possibility of making the new notes out of polymer (a plastic) but eventually opted to keep making them out of cotton paper, which can accommodate commonly known security features in Kenya such as a security thread.
The notes also contain features that are identifiable by touch to accommodate the visually impaired, which cannot be put on a polymer note.
Taking into account the rough handling of Kenyan banknotes that produces rapid wear and tear, CBK applied a varnish on the notes that will allow them three to five years of usage, 30 percent longer than the older notes they are replacing.
Polymer notes on average last two-and-a-half times longer than cotton paper, but are twice as expensive.