The Effect of Anti-money Laundering Regulation Implementation on the Financial Performance of Commercial Banks in Kenya

Abstract

Money laundering is an economic crime that has adversely affected the level of economic development in the economies of African countries. Money laundering has a notorious tendency to discourage or frustrate legitimate business enterprise, corrupt the financial systems and ultimately collapse the economy. This paper examined the effect of anti-money laundering regulation implementation on the financial performance of commercial banks in Kenya. The study focused on 31 Commercial banks who responded to the questionnaire which was used to collect data. The research was conducted through a descriptive survey. The study used both primary and secondary sources of data. Data was analyzed using Statistical Package for Social Sciences and findings presented by of tables. From the findings, the study concludes that bank reporting affects AML these has lead to increased transactional costs due to screening and the reporting frequency that the bank has instituted as well broadened the types of reports prepared. The study further concludes that operational costs affect the performance of commercial banks in Kenya to a very great extent due to increased/high transaction costs that the bank incur including training staff on identification of suspicious activities. In view of the findings, the study recommended that to ensure the stability and integrity of the financial system the financial action task force (FATF) should continue to be implemented in addition to regulatory and institutional framework under the AML Act, in collaboration with the Central Bank of Kenya (CBK).