Strict law on moving cash a headache for politicians in campaign season

When Kakamega Governor Wycliffe Oparanya realised that the strict guidelines on cash transactions above Sh1 million would be a headache during the campaign season, he came up with a simple solution.

He organised for the bank to open a campaign account in which he could deposit and withdraw large amounts of money to pay suppliers, agents and mobilise supporters.

This way, the governor told the Nation, the bank will have no reason to ask him to fill forms of the source and destination of the funds whenever he withdraws more than Sh1 million from the account.

“In this time of elections, politicians no doubt require large sums of money,” the governor, battling against fiery senator Boni Khalwale for his re-election, argued.

“No supplier of anything be it banners, caps, campaign posters, tents, will accept to be paid by cheque. They want hard cash, however much the money is.”

PAID IN ADVANCE

With campaigns, the mantra for many businessmen cashing in is that supplies are paid for in advance or on delivery. Promises of post-campaign payments are famously hard to keep.

Isaac Ruto, the Bomet Governor and Chama Cha Mashinani party leader, faces a similar problem.

“We have asked our campaign material suppliers to accept to be paid by cheques, (if the amount is more than Sh1 million). For the smaller transactions, we pay them in cash,” Mr Ruto told the Nation.

The experiences of the two governors are typical of many politicians campaigning ahead of the August 8 General Election, billed as Kenya’s most competitive and most expensive. With the party primaries which run until April 26, the need for mobilisation has never been greater.

A Central Bank of Kenya (CBK) rule blocking the withdrawal of more than Sh1 million unless one signs declaration forms has become a nagging inconvenience to the politicians who are out to sell themselves ahead of the polls.

CORRUPT SCANDALS

The directive was put in place in January last year by CBK Governor Patrick Njoroge amidst revelations that suspects in corruption scandals were carting away millions of money in sacks from banks at night without any care.

“In compliance with this requirement, all customers making transactions that meet the stipulated amounts will be required to complete a form that captures the source of funds, reason for the transaction rather than electronic means and where the money will be taken after it leaves the bank,” Dr Njoroge said in the guidelines.

Why the regulation? Dr Njoroge argued: “This new guideline aims to reduce the risk inherent with cash transactions, such as losses due to fraud and theft. We encourage you to consider use of electronic payments, which are an alternative and secure channel.”

But with 113 days to the August 8 General Election, the well-intentioned rule to target money launderers and “tenderpreneurs” has now become a nagging inconvenience to politicians in the campaigns although anticorruption crusaders back it.

WRONG GUIDELINE

For governors whose campaigns have been estimated to cost hundreds of millions of shillings, the rule could not have come at a worse time.

“It is a very wrong guideline,” said Governor Ruto.

“But nonetheless, I really do not care about it. My campaign is not based on money but on the supporters. In meetings, I just announce the venue and wananchi come. For campaign materials, I give samples to my friends and they do them.”

Governor Oparanya argued that by opening a campaign account, he was killing two birds with one stone: Skirting around the Sh1 million rule and for transparency in case one would want to know how he spent his campaign cash.

National Assembly Majority Leader Aden Duale drew attention to the “problem” in the House on March 29 and successfully petitioned the Committee on Delegated Legislation to have Dr Njoroge explain why the rule was not subjected to scrutiny by MPs.

LIMITING FUNDS

Mr Duale argued that instead of limiting the funds one can withdraw to Sh1 million, the CBK should have used existing rules that allow banks to manage their own clientele based on the “know your client rules.”

“I am not even concerned about politicians, I am concerned about the small business person, the ordinary Kenyan who has been forced to put their money under their mattresses because they have to fill a form explaining what they want to do with their money. It is even affecting the economy,” said Mr Duale.

Kiharu MP Irungu Kang’ata, one of the frontrunners for the Murang’a senator’s seat, told the Nation that the rule does not affect him at all.

“I pay legitimate entities like service providers for posters, campaign vehicles and such routine payments. When you are paying legitimate and verifiable suppliers, there is no problem,” said Mr Kang’ata.

In the House, a furious Cornelly Serem, the MP for Aldai, had no kind words for the regulation.

DECLARE SOURCE OF MONEY

“It is primitive that a Member of Parliament cannot walk into a bank and withdraw Sh1 million from his savings account.

You have to declare the source of the money or explain how you got it yet it is your salary and your savings that you have worked hard for. We are headed in a direction where members of this society will feel comfortable keeping money under their beds. That primitive requirement should be done away with,” said Mr Serem.

Starehe MP Maina Kamanda described the rule as an “exercise in futility” as the limit on campaign financing had been suspended.

WITHDRAW SH999,999

“It is a big problem. But you cannot beat a politician. I can withdraw Sh999,999 and I do not have to declare that,” he said.

“This rule is not anchored in any law and the CBK needs to explain it. What is a million shillings for a trader these days?” he asked.

It is, however, unlikely that Parliament will get the opportunity to reverse the rule as CBK has the power to issue such guidelines to banks.

With the National Assembly set to adjourn indefinitely on June 15, a month after the current recess ends, it is unlikely that MPs will have time to question Dr Njoroge and force, if they can force, a reversal of the guideline.