In order to improve financial transparency in Kenya, Kenya has reinforced its commitment to global financial transparency by fully implementing the Common Reporting Standards (CRS). This requires Kenyan banks to report details of foreign account holders to the Kenya Revenue Authority (KRA), aligning with over 120 jurisdictions in combating tax evasion.
How this affects financial institutions
- Kenyan banks are now required to report details of foreign account holders to the Kenya Revenue Authority (KRA).
- The CRS implementation deadline for banks was August 31, 2024.
- CRS, introduced by the Organisation for Economic Co-operation and Development (OECD), aims to combat tax evasion through the automatic exchange of financial account information.
- Banks face challenges in accurately collecting and reporting data, particularly in distinguishing between low and high-value accounts.
- Financial institutions need to understand the due diligence requirements for different types of accounts, including pre-existing and new accounts, individual and entity accounts, and high-value and low-value accounts.
- They also need to establish robust data security measures to protect the confidentiality and integrity of the information being exchanged.
Implementation of financial transparency in Kenya Banks
- Data Accuracy: Implement robust data collection and validation processes to ensure accuracy in reporting.
- Security Measures: Establish strong data security protocols to protect sensitive financial information.
- Cross-Jurisdictional Reporting: Develop expertise in navigating the complexities of reporting across different tax jurisdictions.
- Customer Due Diligence: Conduct thorough due diligence procedures to identify and document reportable accounts.
- Self-Certification: Guide customers in completing self-certification forms to confirm their tax residency.
- Technology Adoption: Explore technology solutions to streamline compliance processes and improve efficiency.
How this affects bank users:
Customers are required to complete self-certification forms to confirm their tax residency.
Individuals and entities with foreign financial accounts must accurately determine their tax residency status and disclose relevant financial information to the KRA.
Entities with complex financial structures should review their setups to ensure compliance with CRS regulations.
Benefits for Kenya
- Enhanced credibility as a financial hub.
- Stronger financial governance.
- Integration with global financial systems.
- The key role in the fight against tax evasion.
Last modified: September 24, 2024
