The [Non] Compliance of Commercial Banks in Kenya with United Nations Security Council Resolutions 1267 (1999) and 1373 (2001) on Terror Financing

Abstract

Terrorism financing remains a significant global security challenge, with commercial banks being at risk of being used as channels for illicit financial flows. The United Nations Security Council Resolutions (UNSCRs) 1267 (1999) and 1373 (2001) impose obligations on member states to adopt targeted financial sanctions, freeze terrorist assets without delay, and strengthen mechanisms to prevent terrorism financing. These resolutions require all commercial banks to implement financial sanctions against designated individuals and entities. Despite Kenya having a strong legal framework, which includes the Prevention of Terrorism Act of 2012, and the Proceeds of Crime and Anti-Money Laundering Act of 2009, there are still gaps in enforcement and oversight. The purpose of this study was to analyze the [non] compliance of Kenyan commercial banks to UNSCRs 1267 and 1373. The study objectives were to examine Kenya’s law governing implementation of UNSC resolutions on 1267 and 1373, to investigate challenges commercial banks encounter when implementing the UNSCR and, to explore strategies commercial banks implement to ensure compliance with the resolutions. The research was based on two theories, namely Natural Law theory which stresses banks' moral duty to avoid the abuse of the financial systems and Constructivism theory that stresses norms and culture of compliance as drivers of actions in institutions. 38 Central Bank of Kenya licensed commercial banks were sampled in the research, owing to the population size, census approach was used. Data was collected using a structured questionnaire administered to compliance officers, and complemented by key informant interviews with regulators from the CBK and the Financial Reporting Centre (FRC). Quantitative data was analyzed using descriptive statistics, including frequencies and percentages, while qualitative data were subjected to thematic analysis. Overall, the findings show that while banks have invested in strategies to ensure compliance, regulatory and systematic gaps weaken their effectiveness. This is especially true where unclear guidance leads to reliance on institutional discretion, causing inconsistencies in compliance. The findings of this study are important in guiding the CBK and FRC to enhance supervisory oversight by ensuring issuance of clearer guidelines and addressing systemic gaps such as access to accurate beneficial ownership information, that undermine effective compliance with UNSCRs 1267 and 1373.