SACCOs Told to Strengthen Anti-Money Laundering Measures Amid Fraud Concerns

SACCOs Told to Strengthen Anti-Money Laundering Measures Amid Fraud Concerns

The SACCO Societies Regulatory Authority (SASRA) has directed savings and credit cooperatives (SACCOs) to reinforce their anti-money laundering frameworks, warning that weak compliance systems could expose the sector to fraud, illicit financial flows, and loss of public trust.

The advisory was issued during a virtual sensitisation session focused on Anti-Money Laundering (AML) and Proliferation Financing (PF) compliance, as regulators moved to tighten oversight of a sector that plays a central role in Kenya’s financial ecosystem.

SASRA Chief Executive Officer David Sandagi emphasized that SACCOs must adopt stronger internal controls to safeguard members’ savings and ensure accountability, particularly in light of recent controversies involving mismanagement and fraud in some institutions.

“Robust compliance systems are essential not only for meeting legal obligations but also for protecting members’ funds,” Sandagi said during the session.

SACCOs are a critical pillar of Kenya’s economy, mobilising billions of shillings in savings and providing credit to millions of members, including small businesses and salaried workers. However, regulators warn that their wide reach also makes them vulnerable to exploitation by individuals seeking to channel illicit funds through cooperative structures.

In its recommendations, SASRA urged SACCOs to strengthen customer due diligence procedures, ensuring that all members and transactions are thoroughly verified and continuously monitored. This includes implementing stricter “know your customer” (KYC) protocols and enhancing transaction tracking systems to detect suspicious activities.

“Institutions must remain vigilant and proactive in identifying and mitigating risks linked to money laundering and illicit financial flows,” the authority noted.

The regulator also called for increased investment in capacity building, urging SACCOs to empower compliance officers and staff with the necessary training and tools to effectively discharge their responsibilities. According to SASRA, continuous awareness and professional development are essential in keeping pace with evolving financial crimes.

The directive comes at a time when the SACCO sector has faced heightened scrutiny following a series of reported cases involving financial irregularities, governance failures, and member losses. These incidents have raised concerns about the adequacy of existing safeguards and the need for stronger enforcement mechanisms.

Analysts note that while SACCOs have historically been viewed as reliable community-based financial institutions, rapid growth and increased financial complexity have exposed gaps in governance and risk management.

To address these challenges, Parliament is currently considering the Sacco Societies (Amendment) Bill, which proposes sweeping reforms aimed at strengthening regulation and improving sector stability.

Among the key proposals is the introduction of a central liquidity and shared services framework, which would allow primary SACCOs to pool resources through a secondary SACCO structure. This model is expected to enhance financial resilience by enabling institutions to manage liquidity collectively and respond more effectively to financial shocks.

The bill also proposes a two-tier operational system, where secondary SACCOs would function at a wholesale level, dealing exclusively with primary SACCOs rather than individual members. Regulators believe this structure could improve efficiency, oversight, and risk management across the sector.

“Capacity building and ongoing awareness initiatives are key to ensuring that compliance frameworks remain effective and responsive to emerging risks,” SASRA added.

Industry stakeholders have largely welcomed the proposed reforms, though some have called for careful implementation to avoid disrupting existing operations.

As Kenya continues to strengthen its financial regulatory environment, the focus on AML and compliance reflects broader efforts to align with international standards and protect the integrity of its financial systems.

For SACCO members, the regulator’s message is clear: stronger oversight and stricter compliance are essential to safeguarding savings and restoring confidence in a sector that remains vital to millions of livelihoods.

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SACCOs Told to Strengthen Anti-Money Laundering Measures Amid Fraud Concerns