Digital lenders must disclose the source of their funding in an effort to combat money laundering

The regulations come as the CBK toughens the war on money laundering which CBK Governor Patrick Njoroge says is underway in the digital lending industry.

The Central Bank says digital lenders are hiding under the guise of providing accessible low-interest loans while cleaning up money obtained through criminal activity.

The new regulations stipulate that digital lenders must present evidence of the source of funding to invest in the digital credit sector while proving that the funds are not obtained illegally.

“A digital credit provider must provide the bank with evidence and sources of funds invested or proposed to be invested in the digital credit business and demonstrate that the funds are not proceeds of crime,” the rules say.

The Kenyan market has seen an increased number of digital lending platforms which are thriving due to the need for easily accessible loans by Kenyans.

The increase has been attributed to a lack of policies requiring lenders to disclose their funding sources, making it an avenue for money laundering.

The central bank has also banned digital lenders from passing the names of defaulters to the credit reference bureau without their knowledge.

“A digital credit provider who intends to submit negative information to a bureau regarding a customer must, in writing or electronically, notify the customer of its intention to submit the negative information at least 30 days prior to submitting the information. negative in the office,” the regulations indicate so.

The regulations also aim to protect customer privacy after complaints of privacy abuses by lenders increased.

Lenders deployed tactics that compromised customer privacy, such as contacting defaulter contacts and threatening borrowers with a negative listing.

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