Kenyan financial institutions, including fintechs, are now expected to begin effecting the Common Reporting Standards (CRS), a global standard that requires financial institutions to collect and report information about their customers’ tax statuses.
CRS applies to Reporting Financial Institutions (RFIs) which include depository institutions, custodial institutions, investment entities, and specified insurance companies.
In February 2023, the Kenya Cabinet Secretary for National Treasury officially gazetted the CRS regulations through Legal Notice No. 8 of 2023, with the regulations taking effect retroactively from January 1 2023.
The regulations require RFIs to identify existing reportable accounts, including their total count if present, and file the information with the Kenya Revenue Authority (KRA) with the following information for an account:
- Name
- Address
- Jurisdiction
- Residence
- Tax identification number (TIN)
- Date and Place of birth of each reportable person that is an account holder of the account
Enhanced procedures apply with respect to high-value accounts, which exceed USD 1,000,000 in annual value. For such accounts, the government will require a review of electronically searchable databases, a review of the current customer master file, and review of the following information received within the prior 5 years:
- The most recent documentary evidence collected with respect to the account
- The most recent account opening documentation
- Documentation on Anti-Money Laundering/Know Your Customer (AML/KYC) procedures
- Current Power of Attorney or signature authority forms
- Current Standing instructions to transfer funds
“The due diligence requirements to be applied by RFIs depend on the classification of the accounts on account into either pre-existing or new entity or individual accounts,” says KPMG.
“A reporting financial institution may apply the due diligence procedures for new accounts to all pre-existing accounts in addition to rules for pre-existing accounts. Additionally, the reporting financial institution may apply the due diligence procedures for high-value-account to low-value accounts.”
The move to adopt the CRS framework comes after the global Financial Action Task Force (FATF) added Kenya to its ‘grey list’ of countries in February 2024 requiring heightened monitoring due to insufficient measures against money laundering and terrorism financing.
🇰🇪🇳🇦REGULATION | Kenya 🇰🇪 and Namibia 🇳🇦 Latest African Countries Added to Financial Action Task Force (FATF) Grey List
According to FATF, Kenya primarily faces risks associated with flows of money connected to terrorism financing from both domestic and international sources,… pic.twitter.com/zsHXN1vCCC
— BitKE (@BitcoinKE) February 26, 2024
The adoption of the CRS framework will enable Kenya to exchange financial account information with over 100 jurisdictions worldwide.
Additionally, the KRA will use the financial account information it obtains on Kenyans with offshore financial assets to aid in investigations on tax compliance.
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